Trade pub Private Equity Insider recently reported that CalPERS is marketing more than $800 million worth of big buyout fund stakes on the secondary market. It didn’t provide specifics, but I’ve learned that the public pension giant is offering 20% of its positions in the following vehicles (6/10/10 IRRs in parentheses, based on CalPERS data):
- Apollo Investment Fund VI (2006, 4.8% IRR as of June 30, 2010)
- Apollo Investment Fund VII (2008, 12.9% IRR)
- Carlyle Partners V (2007, -.1% IRR)
- KKR 2006 Fund (2006, 1.9% IRR)
- Providence Equity Partners 6 (2007, -2.5% IRR)
- Silver Lake Partners 3 (2007, -3.4% IRR)
This is basically a portfolio management play by CalPERS, which has hired UBS to pitch the stakes far and wide.
CalPERS currently is right at its 14% allocation to private equity, and also has around $16 billion in unfunded commitments. That’s a workable situation so long as the public markets stay strong and distributions keep picking up, but a change to either of those conditions could dump CalPERS right back into denominator effect despair. In other words, selling now helps provides flexibility in case things out of its control go sour.
But this isn’t all about caution. It’s also opportunistic. Secondary pricing of fund stakes is extremely strong right now, and volume is at record-highs. Expect some more specific research on all that to be released next week…