Kaiser Permanente runs $1.5bn PE secondary sale as it looks to expand strategy

Traditional LP processes may slow down, sources have told Buyouts, as pricing becomes uncertain as a result of macro effects.

Kaiser Permanente, which has ramped up its private equity program at an extraordinary pace since 2019, is selling a portfolio of stakes in private equity funds valued at about $1.5 billion, four sources told Buyouts.

The sale comes as numerous LP portfolios have hit the market, with sellers looking to take advantage of rich pricing. However, uncertainty has crept into the markets amid public market volatility, persistent inflation, rate increases, supply chain disruptions and geopolitical shocks. This is leading to some renegotiating around pricing, and some large portfolio sales may need to be repriced or even delayed until markets stabilize.

For Kaiser, though, the sale appears to be getting done, the sources said. A buyer or buyers are set up to buy the portfolio, though it’s not clear who. The deal could close in the next few weeks, one of the sources said.

Kaiser, based in Oakland, California, is working with adviser M2O on the sale, sources said. The deal early on was envisioned to be larger, around the $3 billion range, but was eventually pared down, one of the sources said.

The portfolio, roughly split 50/50 between credit and buyouts, includes funds managed by firms like KKR, Warburg Pincus, TPG, Mount Kellet and Equistone Partners, two of the sources said.

It’s not exactly clear why Kaiser is selling a chunk of its portfolio. One source said the system may be looking to refocus or expand toward strategies beyond buyout.

Kaiser Permanente, a healthcare provider and nonprofit health plan formed in 1945, had about $33 billion in private equity net asset value as of 2021 across its pension and foundation investments. It quickly ramped up starting in 2019 from about $6 billion in private equity NAV to $33 billion, according to Private Equity International. The system brought on Anton Orlich in 2019 as head of alternative investments. Private Equity International named Kaiser its North American LP of the year for 2021.

Kaiser committed $12 billion alone in private equity last year, PEI said. The system’s private equity portfolio is split between buyout, growth/venture and credit. It also invests in emerging managers and has anchored first-time funds, and makes co-investments.

Kaiser is one of several large LP portfolio sales in the market this year. Others include CalPERS, which had been selling up to $6 billion-worth of LP stakes. Lexington Partners is buying about a third of that portfolio, sources told Buyouts.

Another big sale is from CPPIB, which was shopping a portfolio valued at about $2.2 billion, Buyouts reported. Other sellers include Illinois Teachers’ Retirement System, New York State Teachers’ Retirement System and Dutch pension administrator APG.

Traditional LP processes may slow down, sources have told Buyouts, as pricing becomes uncertain with public tech valuations plummeting this year, and as the broader issues continue to roil markets.

Secondaries advisers are telling potential sellers to hold off bringing new processes to market until at least May or June, when first-quarter valuation marks are set by GPs.