Amid a flurry of deals starting to hit the market this year, a few LP portfolio sales from last year found their way to closure despite challenges in pricing.
Lockheed Martin Investment Management closed a sale of a portfolio of LP fund stakes around year end, sources told affiliate Buyouts. The company sold in the range of $600 million to $700 million worth of its private equity holdings, the sources said.
A spokesperson for Lockheed declined to comment about specifics of the transaction.
“In the normal course of its investment process, Lockheed Martin Investment Management Company regularly reviews its pension asset portfolio to optimize performance and diversification consistent with long-term objectives.”
Lockheed is understood to have worked with UBS on the sale. The company was selling up to $1 billion worth of private equity; in a reflection of the market, buyers have been cherry-picking their preferred GPs and funds out of larger portfolios, rather than buying the whole thing as they may have in the past.
Generally, sellers will bring out a larger portfolio than they expect to sell in order to close a big chunk of it, usually to a host of buyers.
Lockheed’s defined benefit plan assets reached about $35 billion as of 31 December, according to PEI data. GPs in the portfolio as of 2020 include Advent International, AlpInvest Partners, Beecken Petty O’Keefe, Berkshire Partners, Cerberus Capital Management, Clayton Dubilier & Rice, Clearlake Capital, Cinven, Francisco Partners, GSO Capital, GTCR, Inflexion, JW Childs, Lone Star, Marlin Equity, Mason Wells, Oaktree Capital, Platinum Equity, Shoreview Capital, Sycamore Partners, TCV, Tengram Capital and Warburg Pincus, according to the pension’s Master Trust Form.
Another portfolio sale that closed recently was run by UK grocery chain Tesco Pension Fund, which sold about £1 billion ($1.2 billion; €1.14 billion) worth of PE fund stakes. LP portfolio sales took the majority of total secondaries market share last year in a reversal from 2021. Of about $102 billion of total sales last year, about $60 billion were LP sales, according to Lazard’s 2022 full-year volume report.
Such deals are expected to lead off activity this year, with about $14 billion to $16 billion or more of such sales on the market, led by a $6 billion portfolio from Kaiser Permanente.
Last year, average pricing for LP sales was 81 percent of net asset value, an 1,100 basis point decline from 2021, Jefferies said. Pricing discrepancies caused LPs to hold back portfolios, or sometimes only sell portions of their full offering.