NYC completes secondary sale

New York City’s massive pension system has completed a sale of almost $1 billion worth of private equity fund interests on the secondary market, culling numerous relationships as it works to concentrate its large portfolio.

The $122 billion retirement system, which is made up of five different city pension funds, hired UBS to run the sale, which was split up into two tranches. The system declined to sell certain fund interests because it couldn’t get the right price, according to Barry Miller, head of private equity in the office of city Comptroller John Liu.

New York City unloaded about $520 million of commitments in March, and another $456 million in July, Miller said. The sale included multiple buyers, he said, declining to identify them. Dow Jones reported on the sale earlier this week.

New York City currently has no relationships with any of the managers whose funds it sold, Miller said. That includes two funds each from Clayton Dubilier & Rice and Silver Lake and one from Thomas H Lee Partners. Other funds included in the sale were AEA Investors, Ethos Private Equity, HM Equity Management, NewSpring Ventures, Tailwind Capital and Vitruvian Partners, Miller said.

A lot of different factors went into the decisions about the funds to include in the sale, Miller said, responding to a question about whether the sales of particular relationships were driven by disappointment in performance.

In aggregate, the sale was priced at a minimal discount to net asset value, Miller said.

Ultimately, New York City, like many other public institutions, chose to sell interests on the secondaries market to reduce the number of relationships in the portfolio. Prior to the sale, the city’s system had 172 funds run by 108 general partners, representing roughly $13.7 billion in commitments. After the sale, the system had 161 funds with 99 general partners, representing roughly $12.7 billion in commitments.

However, new commitments have boosted the system’s portfolio to 104 general partners, 170 funds and roughly $15 billion in commitments, Miller said.

New York City has committed an average of about $2.5 billion a year to private equity managers for the last few years, and will likely stay on that course in 2012, Miller said.

Secondary sales have become an important method for institutional investors to manage their portfolio, and the market has been busier than ever before in the past few years. The Ontario Municipal Employees’ Retirement System sold roughly an $850 million portfolio to AXA Private Equity earlier this year, and Wisconsin’s state investment board is marketing about $1 billion worth of interests in mostly mega-funds.