New York City's pension plans might unload a $2 billion portfolio of buyout funds to trim their private equity relationships, said two people with knowledge of the plan.
At least one of the five pension plans is weighing whether to sell stakes managed by Clayton, Dubilier & Rice and Silver Lake Management, said the people, who requested anonymity because investment decisions are confidential. Details about which holdings would be sold and what price would be acceptable are still being worked out, they said.
U.S. pension plans have been severing ties with asset managers through so-called secondary sales of private equity stakes to free up money for new investments and improve returns. New York, which had 108 private equity managers as of June 2010, is among investors seeking to concentrate bets with a smaller number of better-performing managers. Private equity accounted for about 6% of the $122.4 billion in assets for New York's pension funds as of April 30.
“It was taboo for pensions to sell funds, but now they're using a secondary sale as a portfolio-management tool,” said Brian Talbot, head of Neuberger Berman Group's secondaries team. “Pensions are invested in hundreds of funds, which has become a huge administrative burden that many of them have decided they can't manage efficiently.”
In the secondary market, investors trade stakes in private equity funds originally sold by buyout and venture capital firms. New York is hoping to capitalize on the growth of secondary sales and take advantage of record amounts raised to purchase previously owned private equity holdings.
Overall, the city's funds gained more than 20% in fiscal 2010, the most in 13 years, which Comptroller John Liu attributed to the hiring of new asset managers, and improved stock and bond markets.
Mike Loughran, a spokesman for Mr. Liu, Thomas Franco, a spokesman for Clayton Dubilier, and Silver Lake's Gordon Goldstein declined to comment.