HarbourVest emerges as largest buyer of New York State Teachers’ portfolio

HarbourVest Partners is the buyer of a large portion of the massive $6 billion portfolio of private equity fund stakes shopped by New York State Teachers’ Retirement System, sources told affiliate title Buyouts.

The Teachers’ pension portfolio is among several that have moved through the market this year, helping to drive secondaries volume even as activity on the GP-led side of the market remained muted.

One of the biggest portfolios this year, NYSTRS’ process was an example of a seller shopping a large offering and letting buyers pick and choose their favourites. NYSTRS has been a steady seller over the past few years.

HarbourVest picked up a portfolio in the range of $2 billion to $3 billion, sources said. Mozaic Capital worked as adviser on the process. Lexington Partners also picked up a smaller part of the portfolio, sources said. Spokespeople for NYSTRS, HarbourVest and Lexington declined to comment.

The portfolio comprised about $4.5 billion of net asset value, and another $1.5 billion of unfunded commitments, Buyouts previously reported. Funds in the portfolio included those from Hellman & Friedman, Cinven and Abry, among others, Buyouts reported.

The system targets 9 percent to private equity and had a 10.9 percent actual allocation as of 31 March, according to Buyouts data. The system has used secondaries sales as a way to rebalance the portfolio and relieve overexposure.

The system has been a regular secondaries seller, working with Mozaic on recent sales. It moved a portfolio valued at about $2.6 billion in 2021-22, though it’s not clear how much of that portfolio sold. It also ran a sale in 2019.

Many LPs have been eager to sell but have held back amid a large gap between buyer and seller expectations. Earlier this year, Kaiser Permanente sold a $6 billion portfolio. Other sellers this year have included Norinchukin Bank, Cathay Life Insurance, CPP Investments and Caisse de dépôt et placement du Québec.

Pricing on LP portfolio sales has generally included discounts to NAV of between 10-20 percent, and this has recently strengthened, especially for buyouts funds.

Last year, average pricing for LP sales was 81 percent of NAV, a 1,100 basis-point decline from 2021, according to Jefferies’ 2022 secondary volume survey. As of the first quarter, pricing for buyout funds was hovering around 85-90 percent of NAV, according to PJT Park Hill.

LP sales continue to lead volume with an estimated $25 billion in deals out of a total roughly $43 billion, accounting for about 60 percent of total volume, according to Lazard’s interim volume report. Such deals made up 49 percent of activity in the first half of last year, Secondaries Investor reported.