The Stanford University endowment is trying to sell up to $1 billion of its private equity portfolio on the secondaries market, but may find buyers hard to come by given that it appears to be under little pressure to make any concessions on value.
The endowment says it is not hurting for liquidity. It saw an approximate 27 percent decline in the value of its assets over the year to end August 2009, to about $12.6 billion. Stanford recently generated around $1 billion in cash through a bond sale.
Endowments have consistently tried and failed to transact on the secondaries market since last year, when Harvard University put up $1.5 billion of private equity stakes for sale and failed to reach an agreement for most of them.
Other endowments like Columbia and Duke pulled sales after failing to reach their anticipated valuation levels, according to sources in the secondaries market.
One source says pricing has not greatly improved in the secondaries market and the endowments have not been very flexible with the pricing they will accept.
Stanford told PEI it will wait until it is offered prices it likes. “We're not under liquidity pressure that forces us to do it,” John Powers, chief executive of Stanford Management Company, said. “If we don't get a price that we feel comfortable with, we're quite happy not to transact.”
Sources say Stanford has approached non-traditional secondaries buyers for the sale, including sovereign wealth funds, insurance companies and public pensions, but has not had any luck.
One secondaries player who is reviewing a portfolio from a distressed financial institution that has many of the same fund assets as Stanford's portfolio said buyers are more likely to work with sellers willing to take a significant discount on the assets they have on the block.
The source said there are today many distressed institutions “with good quality fund portfolios who are willing to accept “market” offers on their private equity, making it more difficult for endowments like Stanford to find well-financed buyers. The due diligence process, pricing and structuring of a diverse portfolio for secondary acquisitions is time- and resource-intensive, and potential buyers will only make that investment if there is a truly motivated seller.”