Montana State Board of Investments has used the secondaries market to help reshape its private equity strategy.
The pension, which has $1.2 billion of private equity assets, has sold a portfolio of 11 stakes for around $70 million, according to a video of its 2 October investment committee meeting. Ten of these stakes were in mature funds-of-funds managed by Adams Street Partners, and the 11th was a stake in GI Partners IV – a $2.04 billion, 2013-vintage buyout fund.
The sale closed in late September.
Speaking at the meeting, investment officer Michael Nguyen acknowledged the role that funds of funds had played in building up Montana’s portfolio and said that the high prices and large amounts of dry powder in the secondaries market made it the “opportune time” to sell. The proceeds from the sale have already been allocated to other capital calls.
The fact that Montana did not re-up in GI Partners V was a factor in that fund being put up for sale, Nguyen added.
GI Partners IV has returned a net multiple of 1.4x and net internal rate of return of 16.59 percent, according to data from Washington State Investment Board.
Montana has been gradually reducing its exposure to funds of funds since 2016. It has no investments in funds of funds of vintage 2016, 2017 or 2018, according to meeting documents.
Montana is one of a number of US pensions to tap the secondaries market this year, following in the footsteps of Alaska Permanent Fund, Los Angeles County Employees’ Retirement Association and Illinois Teachers’ Retirement System, among others.
Advisor Elm Capital, in its review of 2017 which focuses on deals that it worked on, noted that tail-end funds of vintage 2005 or older sold for between 90 percent of net asset value and 102 percent.
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