Having faith in a general manager’s ability to create value and deal pricing are the two most important factors that influence whether limited partners ultimately sell fund stakes, according to Sam Green, a private equity investment officer at Oregon State Treasury.
Green was speaking at a panel on secondaries at the WSJ Pro Private Equity Analyst Conference in New York on Tuesday.
“If you’re in a situation like we are where you don’t really need liquidity and you’re at or above your allocation target, it really comes down to the two questions: how do you feel about the GP, do you think they’re really going to be able to add that value going forward; and then pricing transaction terms,” Green said.
LPs also consider whether or not they need liquidity in the first place, as well as whether a GP has been fair and transparent in a potential sale process, he said.
“GP incentives, their economics and their motivations [are] not always clear,” Green said, adding that there was increasing scepticism among LPs regarding fund restructurings and recapitalisations.
In February, the State Treasury-managed Oregon Public Employees Retirement Fund (OPEF) said it was considering selling stakes in pre-crisis vintage funds this year as part of a strategy to manage its maturing portfolio, citing the increasing burden of monitoring a mature portfolio.
The average age of Oregon’s private equity portfolio has doubled to 8.2 years old since 2008, as has the percentage of funds seven years or older, Green said. Its portfolio comprises interests in 230 private equity funds with 88 general partner relationships, of which 55 are ongoing.
Oregon State Treasury managed almost $89.6 billion in assets as of 31 December, including about $68 billion for OPEF.