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PPF creates secondaries programme

The UK pension ‘lifeboat’ has hired Goldman Sachs, Pantheon, Hamilton Lane, Lexington, LGT, Partners Group and RREEF as advisors.

The Pension Protection Fund (PPF), which first moved into private equity investing in March, has built a private equity secondaries programme to take advantage of distressed LPs selling stakes at “attractive prices”, a spokesperson confirmed.

PPF, which manages about £4 billion in assets, has recruited Goldman Sachs, Hamilton Lane, Lexington Partners, LGT Capital, Partners Group, Pantheon Ventures and RREEF as secondaries advisors.

PPF has not set a specific target for secondaries investments, as “specifying an exact amount and timing is difficult because any specific private equity investment must be sufficiently attractive to us and when taken with our other investments, consistent with the board’s low-risk philosophy”, the spokesperson said. “This means that we will judge very carefully any amount that we invest and the type and spread of private equity secondary investments we might make.”

The PPF was set up by the UK government in 2004 to act as a safety net for the pension scheme members of companies that go out of business. PPF intends to acquire assets from limited partners that are having problems meeting capital calls.

“We regard private equity secondaries as a near-term opportunity with a limited window,” a spokesperson explained in an email. “The economic crisis has resulted in particular opportunities in the private equity secondaries market. This is because existing private equity investors have made cash commitments which they are struggling to honour…Our strong cash flow brings the possibility of making these investments at attractive prices.”

In March, PPF carved out its first allocation to alternatives, earmarking 20 percent of its portfolio for investment in private equity, real estate, infrastructure and absolute returns strategies. PPF will also use a portion of the alternatives allocation to target credit strategies. The organisation will have £780 million for investments across the asset classes.