Recent weeks have seen many institutional investors publish their returns for the latest fiscal year. For many heads of private equity at these institutions, it has been the financial equivalent of a ticker tape parade.

Every day, another handful of pensions and endowments across the world disclose double-digit returns for private equity returns – sometimes in the high double-digits. The $7.5 billion University of North Carolina Investment Fund deserves a special mention, achieving private equity returns of 90.6 percent in the fiscal year, driven by venture capital returns of 142 percent.

This outperformance has had unintended consequences for some institutions and has pushed many  over their target private equity allocation limits. Virginia Retirement System, for example, is nearly 3 percentage points above where it intends to be and State of Michigan Retirement Systems a full 6 percentage points above.

The pandemic has caused limited partners to think carefully about the funds and managers they want to keep on their books. At the same time, June valuations have finally started to reflect the wider economic recovery, which translates into attractive pricing for any LPs considering selling off fund stakes on the secondaries market – sellers in the first half of this year were able to part with buyout fund stakes at 96 cents on the dollar, the highest level since 2018, data from Jefferies shows. The result has been a flurry of large portfolio sales, the likes of which have not been seen for at least two years.

In the last quarter, Florida State Board of Administration sold more than $2 billion-worth of private fund stakes, while State Teachers Retirement System of Ohio and Harvard Management Company offloaded around $1 billion each. New York State Teachers’ Retirement System wants to sell a portfolio of around $2.6 billion, while Montana Board of Investments, Los Angeles City Employees Retirement System and Arizona State Retirement System have all raised the spectre of sales in their latest quarterly meetings.

In the latest issue of Private Equity International’s LP Perspectives Study, out next month, just under half of LPs surveyed said they plan to either buy or sell fund stakes over the next 12 months. Powerful market forces suggest there could be much more opportunistic buying and selling than many LPs have planned for.

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