CIC invests $1.5bn in secondary market with Lexington, Pantheon and Goldman

The Chinese sovereign wealth fund is reportedly investing $500m each in custom accounts with secondaries players Lexington Partners, Goldman Sachs and Pantheon Ventures.

The $200 billion China Investment Corporation (CIC) has agreed to invest $500 million each with secondaries specialists Lexington Partners, Goldman Sachs and Pantheon Ventures via special accounts, according to the Financial Times.

CIC, Lexington Partners and Pantheon Ventures did not respond to requests for comment at press time. Goldman Sachs declined to comment.
The total $1.5 billion invested with the three managers marks the largest capital injection into the private equity secondary market, the UK newspaper said.
CIC’s special accounts are to be managed separately from the main funds of the three firms, sources told the daily. For CIC, the decision also concludes a year spent meeting and mulling over approximately 30 secondary managers, the report stated.

The secondaries markets saw a sharp recovery in the second half of 2009 as bids increased and traditional secondaries players including Coller and Lexington returned, according to research from Cogent Partners. The average bid price in the latter half of 2009 stood at about 72 percent of net asset value, up from 39.6 percent in the first half of last year, according to Cogent.Some large secondaries players were unable to strike a deal with CIC as creating a special account for one investor may conflict with the interests of other investors.

“Splitting portfolios creates transfer pricing issues and there will be winners and losers,” Jeremy Coller, founder of secondaries giant Coller Capital told the newspaper, adding “we are not clever enough to manage the conflicts”.

Pantheon Ventures sees its Asian secondaries activity doubling to 10 percent over time, Elly Livingstone, a Pantheon partners and global head of the firm’s secondaries team, told sister publication Private Equity International in December 2009.

Historically, Asia has accounted for between 4 percent and 5 percent of Pantheon’s secondaries activity.  The firm has garnered $940 million in commitments for its fourth global secondaries fund, which has a target of $3.75 billion, according to a filing with the US Securities and Exchange Commission in December 2009.