Last Friday, I asked you to name the university endowment that’s trying to sell a large portfolio of private equity fund commitments. I probably should have italicized the word “large,” or perhaps used a more emphatic synonym like humongous. The result was that some of you offered up schools like Duke and Stanford – both of which have assets for sale on the secondary market, but not of the scope I was suggesting. Then yesterday one of you got it right, which means it’s time to share…
The answer we were looking for was Harvard. The Ivy Leaguer has retained Cogent Partners to pitch what could be one of the largest secondary sales of all time, with an optimistic asking price in excess of $1 billion. The available portfolio includes a variety of venture capital and buyouts funds, albeit none of its crème de la crème VC (i.e., Sequoia Capital or Kleiner Perkins). It also doesn’t include mega-buyout funds like Blackstone or KKR, but that’s a byproduct of Harvard not investing in them (if you want such fund stakes, there’s plenty available from other sellers).
“But Dan,” says our rhetorical reader. “Didn’t you recently write that the secondary market was virtually frozen, because buyers can’t get comfortable on valuations?”
Yes I did, and that’s one of a plethora of reasons why this sale may not get done. Here are some others: (1) It’s basically impossible to finance something this large, which would require either syndication with other secondaries firms or perhaps a partnership with sovereign wealth funds; (2) Harvard is not a motivated seller, in that it is not facing a liquidity crunch. That makes it unlikely to accept a deep discount; (3) There is some real fear about buying from Harvard, in that they are smart money and you (by virtue of buying from them) will be proven dumb. This isn’t just a reflection of the Crimson pedigree, but of the respect afforded Harvard PE investment chief Peter Dolan and new Harvard CIO Jane Mendillo (a former PE investor, which means she knows more about the asset class than does the typical CIO).
It’s worth noting that each of the above caveats was expressed by potential buyers, which sadly leads to a counter-caveat: They could simply be trying to talk this thing down, in order to get a better deal. We’ll know soon.
Harvard and Cogent declined to comment, naturally.