USS runs large secondary sale with strong pricing in busy market

Universities Superannuation Scheme, a UK pension fund administrator, is shopping a portfolio of private equity fund stakes valued at $800 million or more as secondaries pricing continues to strengthen, three sources told affiliate title Buyouts.

LP sales continue to drive secondaries activity as limited partners look for ways to capture liquidity from their illiquid PE portfolios amid a slowdown in distributions. While LP sales have kept pace, and are expected to continue selling through the summer, GP demand for continuation fund deals is increasing.

USS’s private equity portfolio was valued at about £5.5 billion ($7.03 billion; €6.44 billion) according to its website. Overall, it has about £23.1 billion invested in private markets, including private credit and direct PE, the website said. Private markets represented about 28.3 percent of the system’s total portfolio.

The system is working with Evercore on the sale, which has a buyer or buyers, the sources said. The total value of the sale should fall into a range of $800 million to $1 billion, one of the sources said.

USS’s sale includes funds from GPs like Cinven and Carlyle. Pricing on the portfolio in aggregate is hovering around the mid-90 percent of net asset value as of the reference date, one of the sources noted.

That pricing is a reflection of the strengthening that the market has seen since last year. LPs have generally been tolerant of pricing at 90 percent and above of NAV, sources told Buyouts. Anything below that could kill a potential sale, with the exception of older portfolios an LP is trying to close out, known as a tail-end sale.

USS, one of the UK’s largest public pension systems, is a repeat secondaries seller, having offloaded at least two large portfolios since 2015, Secondaries Investor has reported. The system reported about £73.1 billion in assets in its defined benefit plan.

LP portfolio sales led volume last year, clocking in at an estimated $60 billion out of a total of $115 billion, according to PJT Park Hill’s full-year volume survey. “The LP market continued to drive secondaries volume as LPs sought to generate liquidity to compensate for a lack of distributions from their private market portfolios,” the survey said.

Strong pricing portends continued demand by LP sellers, who will look to cash out at an opportune moment. Buyout funds priced in the 90-95 percent range of net asset value, PJT Park Hill said.