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Public Pension Funds’ Buying Activity on the Private Equity Secondary Market – November 2015

by Katie Edwards

  • 19 Nov 2015
  • PE

Preqin’s Secondary Market Monitor database currently tracks 801 investors with an appetite for purchasing fund interests on the secondary market, 12% of which are public pension funds, second only to private equity fund of funds managers, which account for 23% of investors. Fifty-eight percent of these public pension funds are US headquartered, followed by 34% which are Europe headquartered; the remaining 8% are based in Asia.

Of the public pension funds that have stated a preference for purchasing specific fund types on the secondary market, 62% have an appetite for buyout vehicles. A further 34% have appetite preference for venture capital, followed by growth (24%), mezzanine (22%) and distressed debt (17%).

Eighty-nine percent of the public pension funds with a stated a geographic preference have an appetite for secondary fund interests in Europe. A marginally smaller percentage (84%) of public pension funds are interested in acquiring US-focused fund stakes, followed by 59% that are interested in opportunities elsewhere.

There are a number of public pension funds actively looking to buy fund stakes on the secondary market over the coming year, including CPP Investment Board (CPPIB). In November 2013, the Canada-based public pension fund stated that it expected to invest $10bn in secondary transactions over a five-year period. The fund is opportunistic in its approach to secondary market investing, although it has demonstrated a preference for buyout funds.

The New York City Police Pension Fund is a US-headquartered public pension fund currently taking an opportunistic approach to purchasing secondary fund interests. The firm intends to invest in a variety of private equity funds, including buyout, venture capital, growth and mezzanine funds. The majority of its investments are in US-focused funds, but it also seeks to gain exposure to both Europe and Asia. 

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