Colorado PERA to consider PE secondary-market options

  • $50 bln system mulls opportunities as buyer, seller
  • PE includes exposure to Coller, Lexington secondary funds
  • PE program netting 8.6 pct return over 10 years

Colorado Public Employees’ Retirement Association will explore opportunities in private equity’s secondary market as both a buyer and seller of assets, according to a staff report included in its March 16 board meeting materials.

It’s unclear whether Colorado PERA plans to offload any of its existing PE holdings, which were valued at more than $3.7 billion as of Jan. 31. Colorado spokeswoman Katie Kaufmanis declined comment.

The $50 billion retirement association’s PE portfolio includes some exposure to secondaries through funds managed by Coller Capital and Lexington Partners. The retirement association’s been an active private equity LP since 1982.

Limited partners typically use the secondary market to manage out older funds in their portfolios or develop relationships with new managers.

While it’s unclear why Colorado PERA is exploring secondary-market opportunities, more than 65 percent of last year’s sellers were offloading PE funds for portfolio-management purposes, recent research by investment bank Evercore says.

Evercore estimated secondary-market volumes at a record $54 billion last year, which accounts for both the purchase price of fund stakes along with any unfunded commitments.

Secondary-market firms, which specialize in buying and selling private equity fund stakes, had roughly $77 billion of dry powder for new transactions at year-end.

Transactions led by GPs accounted for roughly a quarter of last year’s transactions, Evercore reported. A little less than 70 percent of the stakes sold on the secondary market were put up for sale by LPs, Evercore reported.

In addition to exploring secondary-market opportunities, Colorado PERA staff reported a “robust” pipeline of possible re-ups with existing PE managers near term. The retirement association’s private equity portfolio was netting a 10-year return of 8.6 percent as of Jan. 31.