Indiana pension halts secondary sales

The $25bn system has ended two secondary sales of more than $820m in private equity interests after its head of private equity, Bob Clone, decided to leave in recent weeks.

The Indiana Public Retirement System has “pulled” two secondary sales that included more than $820 million in private equity holdings the pension was trying to unload to better concentrate its programme, according to four sources in the secondary market.

The sales were being run by two different brokers: UBS was helping the system sell a roughly $220 million chunk of the portfolio, while Greenhill & Company was responsible for helping unload more than $600 million in private equity holdings.

It’s not clear if Indiana has delayed the sales with imminent plans to restart the processes in the future. The system did not return numerous calls and emails for comment. Greenhill and UBS also did not return calls for comment.

What is clear is that the sales were canceled after the system’s private equity head, Bob Clone, decided to leave his role with the pension fund. Clone, who made his decision to leave in recent weeks, was heading up the secondary sales processes at the retirement system. With his departure, the institution did not feel comfortable moving forward with the sales, sources said. Clone could not be reached for comment.

Bob Clone

“[He] was the advocate for the deal,” one secondary source told Private Equity International. Around 30 buyers bid on the LP stakes in the portfolios, sources said.

It’s not clear why Clone decided to leave the pension system. He joined in May 2011 to lead the private equity programme after spending years leading the asset class at Michigan’s state pension system. Clone replaced Greg Davis, who left earlier in 2011 after Indiana merged various pension funds into one unified retirement system.

After the merger, much of the private equity staff left the Indiana system, including Davis, who was the former director of private equity with the public employees’ pension fund, and Bryan Martin, former director of investments with the teachers’ retirement fund. Davis joined 3M’s corporate pension plan as director of private equity, and Martin headed to New Jersey, where he took over a real assets and real estate portfolio for the state’s $72 billion state pension system.

The likelihood is that Indiana will bring the private equity interests back to the market at some point in the future, sources said. The point of the sale was to “clean up” the portfolio. According to one person with knowledge of the system, Indiana Teachers’ private equity programme had a large number of small fund interests with different managers, making the portfolio unwieldy for the small team in charge of managing it.

“They still have to do something,” said a secondary market source. “That Teachers’ portfolio is all over the place.”

Indiana’s private equity sale was one of the biggest on the market in the second half of the year. Activity on the secondary market, which had been on track to match or surpass last year’s total deal volume of around $25 billion, slowed in the summer and hasn’t picked up since — at least at the large end of the market. Smaller secondary buyers have continued to see robust deal activity, sources have said.

Sources estimate deal volume should come in between $23 billion to $25 billion this year, which would still make 2012 one of the busiest years ever for the secondary market.