Unlimited change ahead

Why CalPERS and other LPs are making changes in their secondaries strategies.

The secondaries business is one of the most dynamic, complex and rapidly changing parts of private markets. So it was with great pleasure that I recently took the reins here at Secondaries Investor, having previously gotten to know a number of the industry’s insiders and issues while working as a reporter for Private Equity International.

Based in New York, I’ve been busy meeting with secondaries-focused practitioners across asset classes and one of the things people are buzzing about here is Coller Capital’s recent investor survey. While it was focused largely on the primary market, it revealed something pretty interesting about secondaries, too.

I think most people realise limited partners have been increasingly embracing secondaries as a means of portfolio management – but Coller’s survey showed that a significant portion of the 67 percent of LPs saying they planned to be active on the secondaries market, actually plan to be buyers, not (just) sellers. Particularly North American pensions.

Chelsea Stevenson
Chelsea Stevenson

CalPERS’ head of private equity has already told us it plans to buy certain vintages from specific managers if the pricing is right, and while it hasn’t announced any deals yet, it may be getting closer to doing so. We reported earlier this week that the US’ largest public pension is about to make some changes to its policies that pertain to whether or not it can own more than 25 percent of a fund if it purchases additional interests on the secondaries market. That dovetails with its move toward making bigger bets with fewer managers, something it’s been working on for a while.

Meanwhile, across the pond, some LPs that have been buyers in years past are decidedly not wading into the fray. “A lot of money has been raised and people can get debt more easily, so pricing is frothy,” Michael Lindauer, global co-head of fund investing for Allianz Capital Partners, told us. The investment arm of the German insurer is, however, mulling whether to take advantage of today’s full pricing and sell some of its portfolio to reduce the tail-end and administrative burdens.

Who’s buying, who’s selling, their rationale for doing so and market approach can vary greatly – particularly when talking about some of the so-called ‘non-traditional’ players. That’s something we’ll be tracking in detail as the secondaries market continues to evolve. As well as of course, what the veteran secondaries groups are getting up to, like Partners Group’s recent purchase of European buyout fund stakes. Watch this space.