Greenhill Cogent has outlined its strategy for the sale of more than $1 billion of private equity stakes by Los Angeles County Employees’ Retirement Association.
The secondaries advisor, which was selected in July to manage to the process, has recommended the $1.1 billion portfolio be split, according to meeting documents published on Thursday on the pension’s website.
The main portfolio, with $1.09 billion of net asset value, will hold stakes in 37 buyout, six distressed and two fund of funds/secondaries/co-investment vehicles, the documents noted. The second portfolio – named Small Interest Portfolio – will hold 44 small and tail end-funds worth $55 million. This latter portfolio will be marketed separately, most likely at a greater discount to net asset value.
“Large portfolio buyers will be less keen on the smaller interests, while more targeted buyers may find the full portfolio too sizeable and elect not to participate,” Greenhill noted. “By marketing a small interest portfolio separately, LACERA increases the probability of selling the tail-end assets relative to marketing the portfolio as a single package, where the larger assets would be cherry picked.”
The top five funds account for almost 37 percent of the total sale portfolio. The largest stake – in an undisclosed fund – is worth $104.5 million.
The make-up of the portfolio is:
Greenhill expects initial buyer due diligence to begin in the second week of August. A second-round bid process could occur in mid-September if required, and closing could be accelerated for any funds where binding bids are accepted after the first round.
The buyer will be selected in mid to late September and the deal should begin to close by the end of October, the documents noted.
LACERA announced in February that it wanted to sell up to $1.4 billion of “non-core” fund positions on the secondaries market to streamline its portfolio, reduce administrative burdens and allow resources to be fully dedicated to key relationships.
In May it chose Greenhill, Evercore and Campbell Lutyens for its “bench of approved service providers”, a group of advisor relationships that it can call on to buy and sell secondaries interests.