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Stanford CEO: $1bn in ‘partial interests’ for sale

The university endowment wants to boost liquidity by selling portions of its private equity fund interests, CEO John Powers told PEO.

The Stanford Management Company is looking to sell up to $1 billion of its private equity portfolio on the secondaries market to “rebalance the portfolio” and “improve liquidity”, according to president and chief executive officer John Powers.

Stanford’s endowment, with assets valued at $21.6 billion as of 30 June, 2008, has a 12 percent long-term allocation range to private equity, according to its 2008 annual report. It’s unclear if the endowment is setting a new long-term allocation to private equity.
[quote]We’re looking to sell partial interests in funds we invest in, we’re not looking to sell the entire interest.[/quote] Stanford is absolutely not looking to get out of private equity investing, Powers told PEO. In fact, the endowment is looking to sell parts of its private equity stakes and not fully exit the stakes, he said.
“We’re looking to sell partial interests in funds that we invest in, we’re not looking to sell the entire interest,” Powers said. “We’re not looking to end our relationships.”

The assets Stanford is putting up for sale include a balance of funded and unfunded commitments. Funds that will potentially be part of a sale include small-to mid-market buyout funds, venture capital and real estate. The stakes do not include many mega-buyout funds, a source told PEO.

A separate source told PEO it’s unclear if Stanford will accept “market pricing” for the private equity interests. The source, who has seen what Stanford is selling, said the stakes include “a lot of great managers”.

“It’s not clear what they’re trying to do or if they’ll accept market prices,” the source said. “We haven’t seen the prices. The question is, what are they willing to accept on price?”

Discounts on the secondaries market have thinned from where they were six months ago, when they could get as deep as 50 percent to 60 percent. Average discounts these days linger around 30 percent to 40 percent, according to Cogent Partners. Cogent is helping Stanford with the sale.

Stanford is in no rush to sell the stakes and will wait until it gets a price it likes for the stakes, Powers said.

“We’re not under liquidity pressure that forces us to do it,” he said. “If we don’t get a price that we feel comfortable with, we’re quite happy not to transact.”

The endowment has talked to several sovereign wealth funds as potential buyers of the stakes, according to a person with knowledge of the situation, but nothing has come of the discussions.

A more detailed report on the Stanford secondaries sale process will appear in the November issue of sister publication Private Equity International.