Pension OPTrust shops small portfolio amid larger flow of LP sales

Canadian pension system OPTrust is selling a small portion of its private equity portfolio in a targeted sale that is part of the larger flow of LP secondaries hitting the market this year, sources told affiliate title Buyouts.

LP portfolio sales have led activity over the past two years and limited partners are expected to use the market as a way to generate liquidity as distributions have dried up in the sluggish exit environment. Many limited partner institutions either have used the secondaries market to sell fund stakes or are ready to hit the market with sales as soon as pricing hits the right level.

OPTrust is among a crop of newer LPs in private equity. The system, with net assets of about C$25 billion ($18.5 billion; €17.2 billion), is selling a package of fund stakes valued around $300 million to $400 million, sources told Buyouts. The system is working with Evercore on the sale, sources said.

The system’s private markets group is co-led by Sandra Bosela, global head of private equity, and Gavin Ingram, who leads infrastructure. The private equity portfolio had a fair value of about C$4 billion as of 2022, according to the most recent financial report.

Like other Canadian pension systems, OPTrust shifted toward direct investing over past years, while still maintaining a core of passive fund investing. Prior to 2012, the PE portfolio consisted mostly of funds and secondaries, with direct activity reflecting 20 percent of all assets. By 2020, directs accounted for roughly 50 percent of assets.

The focus is on mid-market buyouts and other PE opportunities in North America, Europe and developed Asia, typically sourced with core fund partners and other investors.

LP portfolio sales led secondaries activity last year, tallying an estimated $66 billion or 59 percent of total volume, according to the 2023 full-year volume survey from Greenhill. Total volume was estimated at around $111 billion, Greenhill said, in line with other surveys from Jefferies, Evercore, Lazard and PJT Park Hill.

Activity accelerated on strengthening pricing, averaging at 82 percent of net asset value across all strategies, Greenhill said.

“LPs were confronted with a perfect storm – a low level of distributions compared to recent history, driven by a general decline in sponsor exit activity, and together with various core GPs with flagship funds in the market competing for primary allocations,” Greenhill said.