Year-End Spotlight: Endowments eschew secondaries

Stanford University's endowment, led by CEO John Powers, was one of many investors who held out for higher valuations on the secondaries market this year.

US endowments this year looked to the secondaries market to sell off portions of private equity holdings but some found bids too low for their liking.

Many settled for small, one-off sales instead of unloading big baskets of offerings, and quietly exited the market.

Stanford University is a good example of an endowment that retreated from the market following disappointment over valuations. Stanford put about $1 billion-worth of partial private equity stakes on the market in the fall, only to pull them in December after receiving what it considered low bids.


John Powers, Stanford Management Company's president and chief executive officer, told PEO that it was a patient investor and would wait for the right price before selling.

Stanford, with Cogent Partners as its broker, tried to sell only partial interests in its private equity holdings to retain its relationships with GPs.

“We’re not under liquidity pressure that forces us to do it,” Powers said during an interview in October. “If we don’t get a price that we feel comfortable with, we’re quite happy not to transact.”

Sources told PEO endowments have felt less liquidity pressure this year because GPs have not been making many capital calls.

Despite less pressure on certain LPs to boost liquidity, many secondary deals have been getting done in the past few months, and sources say capital calls will return to normal levels again in 2010, renewing pressure on some cash-strapped funds. Many LPs will be likely looking to the secondaries market for relief.

For comprehensive information on LP actions and secondaries market activity in 2009, consult the archived PEO coverage listed on the right.