UC Regents runs $1.2bn LP sale of infra fund stakes

The sale is being run in steps, with the first round of about $500m recently closed.

A large LP secondaries sales process featuring some unusual assets is moving through the market with a large group of buyers.

University of California Board of Regents, which managed about $164 billion as of 31 March, is running a sales process of around $1.2 billion of stakes in private infrastructure funds, sources told affiliate title Buyouts. The sale is being run in steps, with the first round of about $500 million recently closed, sources said.

The LP portfolio is among several that are driving secondaries volume this year, eclipsing that of GP-led deals. So far this year, LP secondaries sales represented about 60 percent of the roughly $43 billion of total volume, according to recent secondary volume reports.

A spokesperson for UC Regents declined to comment. Triago is working as adviser on the sales process, sources said. A Triago spokesperson declined to comment.

The first round of sales featured four funds: EQT Infrastructure III, which closed on €4 billion in 2017, and Fund IV, which closed on €9.1 billion in 2019; DigitalBridge Infrastructure Partners II, which closed on $8.3 billion last year; and Stonepeak Infrastructure Fund III, which closed on $7.2 billion in 2018.

The buyers group comprises Goldman Sachs, Hamilton Lane, Stafford Capital, BlackRock, Ares Management, Partners Group and StepStone Group, a source said. Spokespeople for the buyers either declined to comment or did not respond to a comment request.

Pricing came in at more than 90 percent of net asset value as of the reference date, one of the sources said.

The second round of the sales process is expected to run through the fourth quarter, one of the sources said.

UC Regents has long been an investor in private markets, including private equity, real assets and private credit. The system had a $13.56 billion PE portfolio, accounting for about 8.27 percent of its AUM, according to Buyouts data.

Real assets represented around 5 percent of LP deals in the first half, according to Lazard’s first-half volume report.

Endowment/foundations also represented about 5 percent of the seller universe during the same period, the report said.

Cathay Life Insurance also shopped an infrastructure portfolio this year of more than $1 billion, Buyouts reported.

LP sales were estimated at around $25 billion in the first half, according to Lazard’s report. Pricing improved for LP stakes, with buyout fund interests hovering around an average in the high-80s to low-90s percent of NAV, sources have said in recent interviews.

“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.