In this Pensions & Investments article, NEPC’s Scott Perry discusses how institutional investors are reassessing private equity investments made in higher-valuation years and turning to secondaries as a strategic portfolio management tool. View the full article on Pensions & Investments’ site here or read excerpts below.
The California Public Employees’ Retirement System is exploring plans to reenter the secondary market sales arena, joining a growing list of public pension funds and endowments selling portions of their private equity portfolios.
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While the current moment isn’t marked by the kind of distress asset owners felt during the global financial crisis, a number of big institutional investors still “find themselves overweight to private equity and also have sizable allocations to vintages they don’t have a lot of conviction in,” said Scott Perry, a partner with Boston-based consulting and investment firm NEPC, and head of portfolio strategy for the firm’s $130 billion outsourced CIO business.
“Think 2019, 2020, 2021 — vintages and investments that were made with higher valuations,” Perry said. “And they now have a view that those investments are unlikely to be really strong, successful investments, and so they’re looking to get out (to) free up the capital for investment today, rather than hold on to it and end up with mediocre outcomes,” he said.
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