Firms & Funds

PSP shops $1 bln+ PE portfolio as secondaries activity rolls on

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PSP Investments, Canada, pension fund, private equity
Photo courtesy of Reuters/Chris Wattie
  • PSP is one of several public systems shopping PE stakes
  • Traditional portfolio sales help drive deal volume
  • Market has been amenable to sellers

Public Sector Pension Investment Board is shopping a portfolio of private equity stakes valued at more than $1 billion, sources told Buyouts.

PSP is one of numerous public-pension systems selling PE stakes on the secondary market, helping drive deal volume to potentially record levels.

Other systems that have used or are using the secondary market include Ontario Teachers’ Pension Plan, Caisse de Depot et placement du Quebec, Florida State Board of Administration and Los Angeles County Employees’ Retirement Association.  

PSP declined comment. PSP is no stranger to the secondary market, having sold a portfolio valued at about $1.5 billion in 2013, and one in 2010 that generated proceeds of more than $800 million, Buyouts reported.

With about C$153 billion (US$113.5 billion) of assets as of March 31, 2018, PSP has been moving into more direct investing and away from passive fund investing over time.

Guthrie Stewart, PSP senior vice president and global head of private investments, was hired in 2015 to overhaul the private markets operation.

In fiscal 2018 ended March, private equity co-sponsorships and co-investments made up more than half the system’s portfolio from around 40 percent in 2015, Buyouts reported.

PSP commits capital to more than 30 GP teams, a number that will likely expand, Buyouts reported.

A flurry of portfolio sales hit the market toward the end of 2018 in a market with strong pricing. The average high secondary bid for all funds was 93 percent of net asset value in 2017, a 400-basis-point increase from 2016, Greenhill Cogent said in its full-year 2017 secondary-volume report.

CPPIB bought a portfolio of PE stakes valued at about $1.7 billion from OTPP; Goldman Sachs was lead buyer of a $1.3 billion PE portfolio from CDPQ; Blackstone Group acquired an about $1 billion portfolio of PE stakes from LACERA, and Ardian bought a $1 billion portfolio from Florida SBA.

Sources estimated the secondary market could generate more than $60 billion in transaction volume in 2018, between traditional LP stake sales and GP-led liquidity processes, among other strategies.

In 2017, the tally came in around $54 billion, according to Evercore’s first-half secondary volume report published last year.

Action Item: Check out PSP’s annual report here: https://bit.ly/2AuGTau