Shawn Wooden, Connecticut Treasurer

Connecticut’s state pension system is gearing up for a sale of fund stakes out of its private equity portfolio, following the path of several other large state plans using the secondaries market to rebalance their allocations.

Connecticut Retirement Plans and Trust Funds could sell a portfolio valued at around $400 million to $500 million, two sources told Buyouts. Though that could change as the system works with a secondaries adviser – Mozaic Capital Advisors – on figuring out exactly what to sell.

Connecticut’s Investment Advisory Council reviewed Mozaic at its April meeting as the finalist for the job. The firm was recommended by the system’s CIO, Ted Wright, and Treasurer, Shawn Wooden, after an RFP process. A spokeswoman for the Treasury office did not respond to comment requests.

The system is exploring a sale to “rationalize non-core holdings” and “improve long-term return potential” by using proceeds from the sale to invest in opportunities more aligned with Connecticut’s private markets objectives, according to pension documents.

Mozaic will help the system figure out what to include in a sale; run the sale; assist in negotiations; and provide ongoing advice on potential secondaries opportunities to buy or sell, the documents said.

The adviser will be paid a success-based fee based on the cumulative transaction value of the assets sold by Connecticut, the pension documents said. The fee rates the system received as part of the RFP process ranged from 0.10 percent to 0.50 percent, the documents said.

Mozaic last year won a big mandate to sell a portfolio of private equity fund stakes valued at up to $2.6 billion from New York State Teachers’ Retirement System. From 2019 to 2021, Mozaic advised and executed on 24 secondaries mandates on behalf of 17 clients, resulting in the sale of $5.5 billion of private assets, according to the Connecticut presentation.

The system manages about $44 billion, with a 22.9 percent allocation to alternatives, of which 9.2 percent is pledged to private equity. The system has a 10 percent target to private equity, according to Buyouts research.

This year, LP portfolio sales have also been spurred by the unrelenting private equity fundraising cycle, which is causing many LPs to blow through their yearly allocation plans in the first half. This leaves little to no money for commitments later in the year. Some LPs are using secondaries to free up liquidity to continue committing to new funds.

Connecticut’s portfolio will be among a slew of LP sales that have hit the market since last year as fund investors sought to take advantage of rich secondaries pricing. Demand was driven also by secondaries buyers who wanted to diversify away from the large, concentrated asset bets they had been making through GP-led deals.

One such sale is from Washington State Investment Board, which hired Evercore recently to help with its first PE secondaries sale of up to $2 billion in PE fund stakes, Buyouts reported.