GIC gears up for first major secondary sale

The sovereign wealth fund is using the secondary market for its first-ever intermediated sale of private equity stakes as it works to trim down the size of its portfolio. UBS is running the process.

The Government of Singapore Investment Corporation is selling a chunk of its massive private equity portfolio in a sales process being run by UBS, three secondary market sources told Private Equity International.

While the size of the offering could not be officially confirmed, three secondary market sources said GIC is selling about $750 million worth of its portfolio, which includes a large amount of stakes in venture funds. It’s not clear what other funds are included in the offering.

GIC did not return several requests for comment. UBS declined to comment.

The sale represents the first time GIC has pursued a major, intermediated sale of its private equity assets, according to a secondary market source and a person familiar with GIC’s strategy. The institution, which boasts a private equity programme valued at around $30 billion, has engaged in smaller, individual secondary transactions in the past, sources said.

[GIC wants] to scale down relationships that don't make sense for them anymore, or funds that have reached such an age that it doesn't make sense keeping them in the portfolio.

Person familiar with GIC's strategy

GIC is using the secondary market to pare down the size of its portfolio, a process that many limited partners have been going through. New York City's public pension system has also hired UBS to sell off about $750 million of its private equity portfolio on the secondary market.

“[GIC wants] to scale down relationships that don’t make sense for them anymore, or funds that have reached such an age that it doesn’t make sense keeping them in the portfolio,” the person with knowledge of GIC’s strategy said. “The whole secondary theme is very new for GIC, both on the buy and sell side. They are also looking to buy some pieces.”

GIC has been considering secondary sales for at least the last two years, the person said. In 2010, the institution began preparing for secondary investments by dedicating a team to focus solely on the strategy.

“GIC has been contemplating secondaries … but they didn’t do much, maybe they bought a piece here or there,” the person said. “They started to dedicate resources in the first half of last year.”

Last summer, the institution experienced a management shake-up that brought in new private equity leadership. In June, GIC promoted Tay Lim Hock, deputy president of GIC Special Investments, the institution’s private equity arm, to president. Hock replaced Teh Kok Peng, who moved into the chairman role at GIC’s China Business Group.

It’s unclear if the management change spurred GIC to use the secondary market. “It’s probably a combination of an evolution in leadership and the fact that some young people came to the top, and the fact that the market has matured. That gives more comfort to sellers who have an arbitrage mindset,” the person said.

GIC’s offering is one of several that have come, or are anticipated to hit, the secondary market this year. Secondary professionals expect at least the first half of 2012 to be very active, as sellers who retracted offerings in the latter half of 2011 amid market volatility come back to market to try and sell their LP stakes.