Strategic Partners emerges as a buyer in Washington State portfolio sale

More LPs are considering secondaries sales as pricing has strengthened since last year, with high-quality buyout funds capturing pricing at the 90% or higher net asset value range.

Washington State Investment Board is expected to sell a chunk of its private equity portfolio to Blackstone Strategic Partners, three sources told affiliate title Buyouts.

The state pension system’s sale is one of the larger processes in the market. More LPs are considering secondaries sales as pricing has strengthened since last year, with high-quality buyout funds capturing pricing at the 90 percent or higher net asset value range.

A portion of Washington State’s sale is expected to close in June, sources said. The portion Strategic Partners is buying is valued around $500 million, sources said.

The full portfolio Washington State is shopping is valued at around $2 billion. Another part of the portfolio is expected to go to a different buyer, one of the sources said.

The sale is a re-engagement of an earlier process the system ran in 2022, which it pulled off the market at the time after receiving low bids, Buyouts previously reported.

WSIB is working with Evercore on the process. A spokesperson for Washington State declined to comment.

The processes represent the first attempt by Washington State to sell a large portfolio of private equity fund stakes. The system is one of the oldest public LPs in private equity, with a portfolio dating back to the 1980s. The board invests for 38 funds, including 17 retirement funds, five state insurance funds for injured workers, seven permanent funds and nine other funds, the quarterly report said.

Washington State’s private equity portfolio had a market value of about $46 billion as of 30 September 2023, representing around 26.9 percent of the system’s total assets of about $197.2 billion, according to the system’s most recent quarterly report.

Washington State’s sale will be one of numerous large sales on the market this year, sources said. LPs are gearing up to make heavy use of the secondaries market to generate liquidity from the programmes, where distributions have slowed because of sluggish exit activity in the muted M&A environment.

LP-led sales have led secondaries volume since last year, clocking around 65 percent of market activity through the first quarter, according to PJT Park Hill’s first quarter volume report. “Multiple consecutive quarters of reduced distribution activity across their portfolios has led to a multitude of LPs leveraging the secondary market,” the report said.

This year, Los Angeles County Employees’ Retirement Association closed the sale of a private equity portfolio valued at around $1.4 billion, Buyouts reported. One of the main buyers in the deal was Ardian.