GIC shops $2 bln portfolio of PE interests on secondaries market

  • Portfolio hit market recently
  • Cogent working as adviser on the deal
  • LP stake sales make up largest portion of secondary volume

If you thought that sales of traditional LP stakes were fading out, or at the very least weren’t as sexy as they once were, you’d be wrong.

Case in point: GIC, Singapore’s massive sovereign wealth fund, is selling a portfolio of PE stakes valued at about $2 billion, according to three people with knowledge of the process.

Greenhill Cogent is adviser. The portfolio hit the market this week, sources said.

What’s in the portfolio is unclear, though one source described it as containing stakes in large buyout funds. Jennifer Lewis, a spokeswoman for GIC, did not respond to requests for comment.

GIC’s exposure to PE stood at 9 percent as of March 31, 2017, the sovereign fund’s website says. That was unchanged from a year earlier.

Also unclear is why GIC is selling stakes in private equity funds. The fund has staffed up to compete directly for deals.

GIC, formerly Government of Singapore Investment Corp, also established a secondaries group that is a prolific investor in direct secondary deals like restructurings of older funds.

On the fund investment side, GIC built up a network of more than 100 PE-fund managers as of 2017, its annual report shows. It’s not clear how that number has changed over time.

While the portfolio is big, there is a large amount of capital in the secondaries market to handle the size. Firms like Ardian, Lexington Partners, Goldman Sachs and Coller Capital can take over whole portfolios on their own.

Last year, 30 secondaries funds collected $37 billion, the largest secondaries fundraising tally ever recorded, alternative-assets-data provider Preqin reports.

Fundraising was driven by the five largest funds closed, representing 71 percent of all secondaries fundraising in 2017, Preqin said. The largest fund raised was Blackstone Group’s Strategic Partners VII, which closed on $7.5 billion.

This year already has at least one secondaries megafund: Lexington Partners is targeting $12 billion for its ninth fund, WSJ reported earlier this year.

Strong fundraising produced a large pool of uninvested capital, which stood at about $77 billion as of December 2017, according to a volume report earlier this year from Evercore.

The glut of capital in the market has kept prices competitive. The average high bid for all funds was 93 percent of net asset value last year, a 400 basis point increase from 2016, Cogent said.

Traditional LP stake sales, meanwhile, make up the majority of activity in the secondary market, though GP-led deals are closing the gap.

In 2017, GP-led deal volume represented about 25 percent of overall volume, which clocked in around $58 billion, Cogent said in its full-year 2017 volume report.

GP-led deal volume came in around $14 billion in 2017, Cogent said. This was an increase in GP-led deals of 55 percent year-over-year, Cogent said.

Action Item: Check out GIC’s annual report here:

Joggers run past as the skyline of Singapore’s financial district is seen in the background on April 21, 2014. REUTERS/Edgar Su