Preqin’s Secondary Market Monitor currently tracks 613 investors with an appetite for purchasing fund interests on the secondary market, 9% of which are public pension funds. These LPs are headquartered around the world, across North America, Asia, and European countries. Over the coming 12 months, these pension funds plan to take an active approach towards purchasing fund interests on the secondary market.
With regard to the types of fund interests that these public pension funds intend to purchase, 97% will target opportunities to acquire interests in buyout vehicles, and 63% will seek to buy stakes in venture capital funds. An additional 40% will target growth fund interests available on the secondary market, and 37% will target distressed private equity fund stakes. Other fund types being targeted by the public pension funds include mezzanine (31%), balanced (9%), natural resources (6%) and turnaround vehicles (3%).
Geographically, the majority seek exposure to opportunities in Europe, with 92% hoping to purchase stakes in vehicles focusing on this region. A slightly smaller proportion of 89% plan to acquire interests in US-focused funds, and 67% are looking to purchase stakes in funds focusing on opportunities in Rest of World regions.
Of the public pension funds planning to make new commitments in the next 12 months, one of the most prominent and active on the secondary market is CPP Investment Board (CPPIB). The Canadian public pension fund plans to deploy up to $10bn by making secondary market purchases over the next five years, and will expand its team of dedicated secondaries professionals. CPPIB primarily looks to acquire interests in buyout vehicles that focus on global opportunities.
California Public Employees’ Retirement System (CalPERS) is a similarly active public pension fund with regard to purchasing private equity fund stakes on the secondary market. Having already participated in several historical transactions, CalPERS plans to continue to seek such opportunities by investing up to $600mn per year in secondary fund stakes.