PGGM runs large secondary on its private equity portfolio as LP sales dominate

Pricing for secondaries has improved to a net-asset-value level of around 90% for buyout funds.

As the market moves into the last months of the year, many sellers are starting to eye 2024 to launch new processes.

The expectation is next year will be busy as pent-up demand did not find maximum relief this year, while pricing improved slowly because of various exogenous factors, including geopolitical strife.

However, a few larger deals are actively pushing through this year. One large sale is from Dutch pension administrator PGGM, which is exploring a sale of up to $2 billion of its private equity portfolio, sources told affiliate title Buyouts. PGGM is working with PJT Park Hill on the sale.

A PGGM spokesperson did not respond to a comment request this week.

PGGM managed about €23 billion in private equity assets as of December, committing about €3 billion per year in funds, co-investments and secondaries, according to the system’s website. Managers the group backs include Clearlake Capital, Blackstone, Ardian, Permira, Bain Capital and Clayton Dubilier & Rice, according to its website.

The deal is among several limited partner portfolio sales that have driven secondaries activity this year. LP sales have represented the majority of activity as LPs look for ways to generate liquidity out of their private equity holdings as well as rebalance their exposure.

Many large deals have ambitious targets and end up selling only portions of the total offerings. Also, these days sellers generally are amenable to allowing buyers to pick and choose out of an offering.

Secondaries activity was estimated at between $15 billion to $20 billion in the third quarter, according to an interim volume update from PJT Park Hill. LP deals represented about 55 percent of total deal volume, the report said.

Pricing for secondaries has improved to a net-asset-value level of around 90 percent for buyout funds. For select sub-sectors, pricing can reach par or even a premium to par, PJT Park Hill said in the report.

“Price improvement was driven by a focus on quality portfolios and improved views on macroeconomic conditions, complemented by a strong secondary fundraising environment,” the report said.

LP sales were estimated at around $25 billion in the first half, according to Lazard’s first-half volume report. “The resurgence of LP-led transactions demonstrates ongoing secondary buyer interest in diversified portfolios,” the Lazard report said.

The two largest portfolios this year were from Kaiser Permanente and New York State Teachers’ Retirement System – which both shopped $6 billion portfolios. Kaiser’s portfolio sold more than $5 billion, while New York State Teachers’ system sold about half the offering, Buyouts reported.