New Jersey’s $70 billion state pension, which launched its alternatives programme in 2005, is considering putting a big offering of private equity stakes on the secondaries market as a way to cut down on the number of funds it manages.
The state’s Division of Investment is in the very early stages of planning out a sale and has not yet selected which funds would be part of a secondaries offering, sources told PEI. The offering could include as much as $1 billion-worth of private equity holdings, according to one market source.
New Jersey declined to comment.
New Jersey is considering hiring a broker for the sale, sources said, including UBS, Cogent Partners or Credit Suisse, though Credit Suisse may have some conflicts that would prevent the bank from participating. New Jersey has several specialised private equity accounts with Credit Suisse. UBS, Credit Suisse and Cogent declined to comment.
One person with knowledge of the pension said “nothing is imminent” and the sense is that if the state doesn’t think it can get the right prices for its holdings, it won’t sell. While no specific funds have been targeted for sale, if the pension “puts out all junk” on the market, it probably won’t like the prices buyers will be willing to pay, the person said.
The sale is an effort to cut down on the number of private equity relationships in the private equity portfolio, sources said. New Jersey is “basically looking to kick-start its programme” after making only one pure private equity commitment in two years, one secondaries source said.
The pension has formed numerous relationships since the programme launched, including with TPG, The Carlyle Group, Onex Partners, Welsh, Carson, Anderson & Stowe and JLL Partners. New Jersey also has several private equity separate accounts with Credit Suisse.
New Jersey launched its private equity programme in 2005 and committed capital at a quick pace. The pension has about $4.6 billion committed to the asset class. The pension’s target to private equity is about 7 percent, with its actual allocation at about 5.5 percent as of November 2010.
The state investment council last year preliminarily recommended increasing the overall allocation to alternatives to 38 percent from 28 percent and bumping up private equity to a 12 percent target. The new asset allocations need final approval from the council.
Several US public pensions are using the secondaries market this year to manage their private equity portfolios. The California Public Employees’ Retirement System is selling about $800 million-worth of private equity holdings, and the New Mexico’s state endowment is considering a substantial secondaries offering to trim down its manager relationships.
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