CalPERS puts $800m of LP stakes for sale

The $226bn pension is selling a chunk of its private equity portfolio that includes a large amount of mega-fund holdings.

The California Public Employees’ Retirement System has put about $800 million-worth of private equity stakes on the secondaries market, an offering that includes heavy interests in mega-funds.

UBS is brokering a sale, though it’s unclear if the bank is working with the whole portfolio or only a portion of it, a person with knowledge of the situation told PEO.

CalPERS declined to comment about the transaction. Private Equity Insider first reported on the sale.

CalPERS is selling into a market in which pricing, even for mega-fund stakes that once transacted at deep discounts, are moving at or near par, sources have told PEO. The secondaries market also is crowded with buyers these days, with big, traditional secondaries firms armed with dry powder from recent fundraisings.

The $800 million offering is not as dramatic as the massive $2 billion-worth of private equity holdings CalPERS sold on the market over several months between 2007 and 2008. That sale, the result of a “scrubbing” procedure the pension undertook, was also run by UBS. The sale was meant to help CalPERS trim down its private equity portfolio to a more manageable level, the pension said at the time.

The pension ultimately sold off 21 percent of its private equity fund interests, which included 80 partnerships comprising 60 different GP relationships across strategies including buyouts, venture and distressed debt.

However, while the pension was selling off a huge chunk of its portfolio – which occurred between the third quarter of 2007 and August 2008 — it was ramping up its exposure to mega-funds. Between late 2007 and 2008, the pension committed almost $1 billion each to TPG and The Carlyle Group, $500 million to The Blackstone Group and bought big stakes in Apollo Global Management and Silver Lake Partners.

The $800 million offering, one of the biggest – if not the biggest — in the early days of 2011, looks to be a move away from the mega-fund strategy the pension once pursued. CalPERS is at its 14 percent target allocation to alternative investments.