Lockheed Martin shops $1bn private equity portfolio

Secondaries activity has slowed as a result of market dislocation and a wide gap between buyer and seller expectations.

Lockheed Martin’s corporate pension is understood to be selling a portfolio of limited partner fund stakes valued at up to $1 billion.

The LP portfolio sale is among a few that appear to be making their way through the market and heading for final close, according to affiliate title Buyouts. Another LP portfolio up for sale is UK grocery store Tesco’s pension, which is shopping up to £1.5 billion ($1.9 billion; €1.7 billion) of private markets fund stakes.

Secondaries activity has slowed as a result of market dislocation and a wide gap between buyer and seller expectations. Once, and if, GPs write down assets to levels commensurate with public markets, the discount level demanded by buyers will begin to moderate, and could make sellers more comfortable with optical pricing.

However, GPs are publishing third-quarter portfolio marks now and anecdotally appear to be flat to slightly up, not a big change from either first- or second-quarter marks.

Lockheed’s sale is being run by UBS, sources said. The process appears to be proceeding smoothly, though several sources said they do not expect the entire thing to transact. In the challenged markets, buyers are more likely to cherry-pick stakes in funds from GPs they like.

“In the normal course of its investment process, Lockheed Martin Investment Management Company regularly reviews its pension asset portfolio to optimise performance and diversification consistent with long-term objectives,” a Lockheed spokesperson said in an emailed statement. “In general, it is LMIMCo’s practice not to comment on rumours or speculation regarding its investment decisions.”

Lockheed’s defined benefit plan assets reached about $35 billion as of 31 December, according to Pensions & Investments. 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.

Average pricing for LP buyout portfolios was around 82-87 percent of reference date net asset value, according to a quarterly report from PJT Park Hill. LP portfolio sales represented about 44 percent of the estimated $20 billion to $25 billion of total volume in the third quarter, according to the report.

LPs appear to be growing more willing to sell in the tight liquidity environment. Evercore reported in its first-half volume survey that 77 percent of respondents said they sold in GP-led asset-based deals, up from 64 percent in 2021. While asset deals like single- and multi-asset continuation fund processes are different, the numbers show increasing appetite among LPs for liquidity in secondaries.