The Tar Heels may be the latest limited partner to charge into the secondary market, if the UNC Management Co. goes ahead with a secondary sale of private equity portfolios.
UNC President and CEO Jonathan King spoke to PE Week and confirmed a report that the company, which manages endowment funds of the University of North Carolina, is considering a secondary sale.
The potential portfolio of investments that may be sold in a secondary deal contains buyout and venture assets, according to King, and would be done to bring the LP’s asset allocation in line with its 15% target.
Similar to many limited partners, UNC finds itself with a larger than normal private equity allocation due to declining value of public equities and other asset classes.
King cautioned that the limited partner, which has $1.32 billion under management, is only in the early, exploratory stages of a deal. UNC is using a third party advisor to put the portfolio of private equity assets on the market, reported to be Cogent Partners. Cogent did not return calls for comment.
UNC’s investments include funds managed by such venture firms as Accel Partners, Battery Ventures, Domain Associates, Foundation Capital and Morgenthaler Ventures, according to Thomson Venture Economics (publisher of PE Week).
Additionally, UNC has invested in funds managed by buyout firms Bain Capital, Heritage Partners and J.W. Childs Associates. UNC also has invested in such fund-of-funds as Commonfund Capital and HarbourVest.
The secondary market is increasingly used as a viable means of portfolio management, particularly as LPs find themselves in need of staying within allocation mandates while still desiring to stay active and available for new investments.
The volume of the secondary market as a whole has risen considerably in recent years. Secondary firm Lexington Partners, which tracks secondary market data, estimates that the secondary deal volume was $7 billion in 2004, compared to $3 billion in 2002.
While Lexington won’t speculate on what may happen this year, many in the secondary market say it would not be surprising to see the deal volume reach $9 billion or higher this year.