HarbourVest emerges as lead investor in $1bn-plus PSP secondaries sale

Large portfolio sales have taken up buyer interest in the second half, as many look to diversify beyond the concentrated bets they made earlier in the year.

HarbourVest Partners was lead investor on a roughly $1.5 billion sale of a portfolio of private equity fund stakes from Public Sector Pension Investment Board, a source told affiliate title Buyouts.

PSP Investments brought the portfolio to the market earlier this year. The deal was intended to move private equity assets off the pension’s balance sheet into an affiliate vehicle to be managed by the system’s PE team. The deal was also envisioned to provide a slug of fresh capital for future funds and co-investing. The final complexion of the deal is unclear.

Representatives from HarbourVest and PSP declined to comment.

PSP, which holds around C$204.5 billion ($160.6 billion) of net assets, is Canada’s fourth-largest pension system. But, like many Canadian pensions, it behaves differently than US public pension systems when it comes to private equity, often directly competing, or partnering, with GPs on deals.

For systems like PSP, co-investment and direct investing have become the more prominent part of their private equity programs. The systems make fund commitments, but generally as a way to boost their direct investing relationships.

The sale is one of a number of large portfolio deals on the market as the year comes to a close. Other big processes include Pennsylvania Public School Employees’ Retirement System shopping a $1 billion-plus private equity portfolio, and New York State Teachers’ Retirement System is shopping a portfolio of private equity fund stakes valued at around $2.6 billion.

Large portfolio sales have taken up buyer interest in the second half of the year, as many buyers look to diversify beyond the concentrated bets they made in the early parts of the year and in 2020.

In the first half, GP-led secondaries deals like single-asset continuation funds represented about 57 percent of the $46 billion in total estimated activity. LP portfolio sales were expected to accelerate in the second half, sources told Buyouts.

The sales have come amid an environment of rich pricing, which generally helps convince institutions to move forward with contemplated rebalancing. Pricing for buyout funds hovered around 92 percent of net asset value in the first half, according to Greenhill & Co’s first-half volume report.

“The main beneficiaries continue to be newer vintage funds and funds with exposure to “covid-proof” sectors (eg. healthcare, tech-enabled businesses and consumer staples),” Greenhill said.