Canada’s PSP shops $1bn portfolio

The portfolio, which includes funds from the boom era of 2006 to 2008, is one of the biggest to go on the block this year.

Canada’s Public Sector Pension Investment Board, which oversees about C$76 billion in total assets, is shopping a private equity portfolio of around eight funds valued at about $1 billion, according to four secondary market sources. 

PSP declined to comment. The portfolio is being brokered by Cogent Partners, the sources said. Cogent declined to comment. 

The funds are of vintages ranging from 2006 to 2008, according to one secondary market source who has seen the offering. It’s not clear who the managers are in the portfolio, though they were described by one source as mega-funds. 

PSP has been culling its private equity portfolio as it gradually moves to a model of more direct private equity investing. The pension plan was in the market last year with a portfolio of private equity stakes valued at about $1.5 billion, a source told Private Equity International

Private equity returned 16 percent for fiscal year 2013, the pension board reported in its fiscal year annual report. The pension fund had about C$6.9 billion in private equity assets as of 31 March, 2013, according to the report. 

PSP’s private equity return is split between fund investments, which generated investment income of C$534 million, for a 12.6 percent internal rate of return, and income from co-investments of C$466 million, for a 23.5 percent IRR, the report said. 

The portfolio is one of the biggest on the market this year, in what has been a relatively slow period for secondary deal activity. Cogent reported this week that total deal activity in the first half reached about $7 billion, a major reduction from last year, when early-year deal activity hit around $13 billion.

Large portfolio sales have largely disappeared from the market since at least the latter half of last year, with the exception of some big transactions in Europe. Lexington Partners, for example, earlier this month reportedly acquired a $648 million portfolio of private equity fund interests from Assicurazioni Generali, the second such transaction following a roughly $400 million secondary purchase from the Italian insurer in 2012. 

Also, German bank HypoVereinsbank has been shopping a portfolio of fund interests in a sales process run by UBS, according to an article from Dow Jones. Secondary firms Coller Capital, AXA Private Equity and AlpInvest Partners have been vying for the assets, Dow Jones reported earlier this month. 

Still, deal pipelines are starting to build, sources have told PEI in recent interviews. Cogent predicted in its pricing report that total deal activity for 2013 would end up around $18 billion to $20 billion, which would mean the second half would be an amazingly busy few months.