Montana bypasses advisors to save $100k in stake sale

The state's Board of Investments sold stakes in two private equity funds at a premium to NAV and did not use an advisor, meeting minutes show.

Montana Board of Investments saved around $100,000 by not hiring an advisor when it sold stakes in Summit Partners and TA Associates funds in the first half of the year, minutes from its August meeting show.

Ethan Hurley, the board’s director of private investments, said the sale transacted above par and that “frictional costs” were avoided by selling stakes directly to a general partner, according to the minutes prepared for the board’s 15-16 November meeting.

Montana received $26.2 million from selling its $20 million commitment in the 2011-vintage Summit Partners Growth Equity Fund VIII and $10 million interest in the 2010-vintage TA Associates XI, the pension previously disclosed. A UK regulatory filing shows Adams Street Partners used four vehicles, including its Adams Street Global Secondary Fund 5, to acquire the TA XI stake. It is understood the Chicago-headquartered investment firm also acquired the Summit Partners interest.

Montana sold the stakes opportunistically and its relationships with the managers was non-strategic, according to the minutes.

Board staff spoke to Montana’s secondaries managers and several advisors, and ultimately reached a competitive price by engaging directly with the buyer, the minutes note.

Summit Partners Growth Equity Fund VIII had a 1.52x multiple and a 32 percent internal rate of return as of 31 March; TA XI had a 1.55x multiple and a 19.7 percent IRR as of the same date, according to a performance document by the Florida State Board of Administration, an investor in the funds.

Asked by a board member how the sale compared with Montana’s first secondaries sale, Hurley said the process was always “fairly onerous” with a lot of paperwork and back and forth. While advisors can help in creating competitive pricing by expanding the buyer pool, Montana arrived at a competitive price by going directly to the buyer, Hurley said.

The board will redistribute proceeds from the sale back into the private equity pool based on asset allocation needs.

In 2014, the board sold interests in eight private equity funds with total net asset value of $126.6 million to three separate buyers for a total purchase price of $133.6 million, as Secondaries Investor previously reported.

Pension funds were expected to remain the most active sellers in the second half of this year and account for 36 percent of sales by volume, according to a report by Setter Capital.

According to a survey to be published in sister publication Private Equity International‘s December issue, 41 percent of limited partners globally plan to either increase or maintain sales of alternative asssets fund stakes over the next year.

Montana was established in 1972 and manages over $16 billion in state funds, according to its 2015 annual report.

Adams Street declined to comment. Montana, Summit and TA Associates did not return requests for comment.