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Harvard to sell $1.5bn in private equity stakes

The $37bn university endowment will make substantial cutbacks to its private equity portfolio, which one secondary investor calls a 'sophisticated' move to sell before other LPs do the same.

Harvard Management Company is looking to unload roughly $1.5 billion in private equity stakes in the secondary market.

A secondary market source described the university endowment, which had $36.9 billion in assets as of 30 June, as a highly sophisticated limited partner making a proactive decision to seek liquidity and rebalance its portfolio based on cash flow models.

Although the volume of supply in the secondary market has risen of late, secondary investors expect it to surge further in the first half of 2009 as more LPs make a similar move to access needed liquidity.

Harvard is ahead of many limited partners in going to the secondary market and will obtain a more attractive price for its assets than those heading to market six months down the line as the result of supply demand dynamics, the investor said.

Harvard’s secondary sale will drive down prices in the secondaries market because it will take $1.5 billion of demand out of the market at a time when supply is not rising, the investor added.

For the 2009 fiscal year, Harvard has a target private equity allocation of 13 percent up from 11 percent for the 2008 fiscal year. The endowment currently has roughly $4.5 billion in private equity commitments, according to sister data web site Private Equity Connect.