Public pension funds sold more on the secondaries market than any other seller by volume in the first half of this year, according to a report by Greenhill Cogent, the advisory arm of New York-based investment bank Greenhill.
Of the roughly $15 billion transacted between January and June, public pension funds accounted for around 35 percent of sellers, almost tripling their share from 12 percent for the same period a year ago, according to Greenhill Cogent’s semi-annual Secondary Market Trends and Outlook report, released last month. Financial institutions, including insurance firms, made up only 8 percent of sellers, a drop from 29 percent for the same period in 2014, when they were the largest sellers by volume.
Transaction volume for the first half of 2014 was about $16 billion.
“The primary factor driving most LPs to sell is a desire to re-position their private portfolios,” the report noted. Shifting investment focus, moving away from fund investing to direct investing, and team changes within an LP were reasons behind this desire, according to the report.
“Many LPs feel that high valuations and strong demand in the secondary market simply represent an opportune time to de-risk the portfolio if the desire is to shift to a more defensive or conservative portfolio posture over the near-term,” the report noted.
General partners were the next biggest seller by volume after public pension funds, accounting for 13 percent of deals, a drop from 20 percent the previous year. Greenhill Cogent, which advised on the sale of over 400 fund interests during the first half of the year, said it expected secondaries deal volume to rise.
“It is not difficult to envision volume in the second half of the year exceeding $20 billion, as was the case in 2014,” the report noted.