Partners Group steps up as buyer on $1bn-plus CDPQ secondaries sale

Partners Group is buying a large portion of a portfolio of fund stakes and co-investments being shopped by Canadian pension giant Caisse de dépôt et placement du Québec, sources told affiliate title Buyouts.

The sale, which launched this year, is part of a wave of LP secondaries that have been driving volume despite slower activity on the GP-led side. The CDPQ sale was re-launched after the system shopped a portfolio last year but decided to pull back as prices fell in the market decline.

Partners Group is buying a portfolio of partial stakes in funds and co-investments with net asset value of roughly $1.1 billion, sources said. The deal is Partners’ largest secondaries deal on a total adjusted commitment basis, a source said. Evercore worked as secondaries adviser on the sale.

The partial stakes come from across CDPQ’s private equity portfolio, sources said. It’s not clear exactly which funds Partners Group is buying into, but the portfolio was said to include buyout managers including Genstar, CVC Capital Partners, Brookfield, CD&R, Silver Lake, Veritas Capital and Stone Point.

Partners Group knows the portfolio, with overlap in the funds and direct exposure to some of the co-investments, one of the sources said.

The majority of the NAV is in the US with exposure to sectors including application software, consumer finance, industrial machinery and healthcare technology, the source said. The overall weighted average vintage of the portfolio is 2018, the source said.

CDPQ’s sale was unusual in that the system was trying to offload partial stakes in funds; generally LPs will fully cash out of their fund commitments in secondaries sales. In this case, the system was looking to generate liquidity and yet not fully exit funds from GPs with which it wants to continue working, sources said in previous interviews.

“They don’t want to part ways with their very core relationships. They’re selling 5 percent of funds doing really well, what do they lose in selling small portions of it,” a source said in a previous interview, adding that if CDPQ’s sale is successful, other systems may try out similar structures.

CDPQ’s process is among several large LP sales that have moved through the market through the summer. Other sales include CPPIB, which ran parallel processes to sell fund stakes and co-investments; fund of funds manager Horsley Bridge, which has been shopping stakes in VC funds; and New York State Teachers’ Retirement System, shopping a $6 billion PE portfolio.

Secondaries professionals have stressed in recent weeks that pricing has improved since late last year and the expectation is that it will continue to strengthen.

“We expect pricing for buyout funds to improve moderately (which was already partially observed in Q2 vs Q1 2023) as the valuation gap between public and private markets closes, and falling inflation leads to an easing of monetary policy,” according to a half-way secondaries volume report from Greenhill & Co.

Pricing on LP portfolios hovered at a medium-high bid of 80 percent across all strategies, similar to last year, Greenhill said. Buyout pricing slipped slightly in the first half to 83 percent of NAV, from 84 percent last year, the report said. LP sales accounted for around $27 billion of total first-half volume of $44 billion, Greenhill said.