Pension Funds To Private Equity: We're Just Not That Into You

Last week we noted the results of one study, which showed that private equity firms’ bonuses would increase this year because the funds had more money to dole out.

Well, so much for that. It seems that pension funds and endowments, private equity’s main investors, are getting skittish in the wake of news like KKR delaying its IPO and they’re not returning private equity’s calls for investments. (Private equity, they’re just not that into you.)

WSJ: Public pension funds and endowments are turning down invitations to make private-equity investments. The nation’s largest public pension fund, the California Public Employees’ Retirement System, or Calpers, is asking private-equity firms to ease off on requests for additional capital it had previously committed to deliver. Calpers has $189.6 billion of assets under management.

Harvard University, with an endowment of $36.9 billion under Jane Mendillo, is seeking to offload about $1.5 billion in investments with private-equity firms such as Bain Capital LLC, according to people familiar with the situation. If the Harvard portfolio trades, the transaction would be one of the largest-ever sales of a private-equity stake. Bids are due this week…

“People have awakened to the fact that private equity can be a liability, not just an asset,” said Andrew Rosenfield, chairman of Guggenheim Investment Advisors, which has more than $50 billion under management or supervision for endowments and wealthy families.

Harvard’s timing is notable as it apparently is willing to sell into weakness to pursue what it perceives as preferable opportunities elsewhere. Discounts on secondary sales — buying another investor’s private-equity position — have become much steeper in the past few months, industry participants said. The declines come amid general market malaise and as some pension funds and endowments, known as limited partners, have felt crunched by private-equity “capital calls” or demands to deliver cash to private-equity firms per prior agreements.

See Also: Private-Equity Bonuses Booming

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