ADIA mulls private markets secondaries sale – exclusive

The world's third-largest sovereign wealth fund sold a portfolio worth $2.4bn to Ardian in 2014.

Abu Dhabi Investment Authority, the world’s third-largest sovereign wealth fund by assets, has become the latest group to consider a large portfolio sale on the secondaries market.

The Gulf-based investor is mulling offloading a portfolio of private market fund stakes and has been speaking with advisors about a potential process, according to three sources familiar with the matter.

It is unclear how much ADIA is considering selling.

One source familiar with the process said that the SWF could sell as much as $4 billion worth of commitments, and that they comprised mainly of private equity and fund of funds interests.

ADIA, which has around $828 billion in assets, according to PEI data, has tapped the secondaries market before. In 2014, it sold a portfolio worth $2.4 billion of private markets fund stakes to Ardian. That sale included stakes in 3i, Apax Partners, Carlyle, Lion Capital, Montagu Private Equity, Terra Firma and Candover Partners funds, according to UK regulatory filings.

Its private equity team is led by Sherwood Dodge, who joined ADIA in 2016.

According to research by advisor Campbell Lutyens from September, of the LPs based in the six Cooperation Council for the Arab States of the Gulf nations that have more than $2 billion in private equity assets under management, almost 42 percent have either undertaken a secondaries sale in the past two years or expect to undertake such a sale in the coming two years.

Excluding Saudi LPs, the figure rises to just over 58 percent, according to Campbell Lutyens.

In its 2018 Annual Review, ADIA said it expected a tough road ahead for private equity.

“With valuation and leverage metrics at or near record levels, private equity returns are likely to face headwinds going forward,” the report noted. “Indeed, there were signs during 2018 of heightened caution in the market, as investors took note of sudden, sharp drops in public equities at various points during the year.” Such indicators suggest that the prolonged equity bull market may be entering its latter stages, the report noted.

The SWF’s private equities department “will continue to favour opportunities with defensive or structured characteristics that will prove resilient across market cycles”, ADIA noted.

The institution would continue to make both principal and new fund commitments to partners in the year ahead, ADIA wrote.

ADIA’s private equity fund commitments include $500 million to Kotak Special Situations Fund, as well as commitments to the 2012-vintage $2.2 billion Hony Capital Fund VIII, the 2015-vintage €6.82 billion EQT VII and the 2015-vintage $2.6 billion Thomas H Lee Equity Partners VII, according to PEI data.

A spokesman for ADIA declined to comment.