British Columbia Investment Management Corporation is eyeing a sale of a large portfolio of private equity fund stakes at a time when such large portfolio sales have been mostly on pause.
Secondaries activity took off in the summer as the market slowly emerged from the coronavirus lockdown. The focus, however, has been on GP-led processes like continuation fund deals as ways to extend hold periods and raise additional capital for certain assets.
This has become even more important as exit timelines get extended out as markets reopen and businesses navigate their way through the health crisis.
LP portfolio sales, the most traditional form of secondaries, have largely stopped as buyers look for ways to appropriately price the diverse underlying assets held within the PE funds. It’s been hard to gauge pricing because of the varying impact of the lockdown on different businesses in different sectors.
A few sellers have tested the market, but not much has transacted, sources have told Buyouts in prior interviews. It will be interesting to see how the BCIMC portfolio moves through its process.
In the first half, traditional LP sales still dominated total deal activity, which came in around $18 billion, Evercore estimated. About 59 percent of that total was in LP stake sales, Evercore found. That breakdown will likely change for the second half.
British Columbia is expected to sell a portfolio of up to $1 billion. A spokesman for BCIMC did not respond to a request for comment Thursday.
BCIMC, with $171.3 billion of managed assets, has been working to build up its co-investment capabilities and increase in-house asset management. As part of that it’s been divesting fund commitments from what it considers non-core relationships.
The system in 2019 sold off 10 private equity fund sales for total proceeds of C$800 million, and before that, 20 fund investments that it no longer considered aligned with its strategy, according to its 2017-2018 annual report.
BCIMC has a $17.9 billion private equity portfolio. As of Dec. 31, 2019, the portfolio was generating a 16.2 percent return over one year, according to the system’s website. The system committed $5.3 billion to private equity for the year ended Dec. 31, 2019, according to BCIMC. That’s made up of $1.6 billion to eight direct investments, and $3.7 billion to 18 funds, both to existing relationships and seeding new partners, the report said.