Guardian Life considers secondary sale of PE assets: UPDATED WITH VIDEO

  • Secondary market interest is strong: Gordon
  • $100 million of “select funds” subject to disposal
  • ”When the ducks are quacking, feed the ducks”

Maurice Gordon, a managing director at Guardian Life and its head of private equity, disclosed the potential sale on June 25 at the Buyouts Midwest conference in Chicago. (See video here.)

Guardian Life’s private equity portfolio, which Gordon characterized as having a net asset value of roughly $800 million, may sell $100 million of assets by mid-2015, he said.

“As most of you probably heard, the secondary market is amazing right now. Maybe we’re not at the peak, but we’re getting to where we can see a peak pretty clearly,” he said. “That being the case, this is the time in the cycle where you can do some active management” by selling “select funds” that may be “off-strategy for where we want to take the program.”

Gordon went on to say that the decision to enter the secondary market as a seller will strengthen his staff’s ability to actively manage the portfolio. When pricing on secondary assets fall, he sees the life insurance company possibly re-engaging the market as a buyer, as it has in the past.

“By year-end, it looks like we’ll have some sales,” he said. “I don’t have a gun to my head saying I’ve got to make a sale, but you get calls every day from secondary brokers.” He added: “What do they say? When the ducks are quacking, feed the ducks.”

Gordon declined to specify what fund interests would be made available, though he did say that Guardian Life would not limit its sale to poorly performing vehicles.

In addition to its possible engagement of the secondary market, Gordon said he plans to expand the insurance company’s capacity for private equity co-investment through a separately managed account, which will be supported by the addition of a new senior investment professional (another junior professional may be added later on). He also said Guardian Life may scale down its sub-allocation to venture strategies to a range of 10 to 15 percent from 25 to 30 percent.

Gordon took over Guardian Life’s private equity portfolio from David Turner, who retired from the life insurance company in May. Turner oversaw the construction of the portfolio to roughly $1.3 billion in commitments, the bulk of which are dedicated to mid-market strategies in the United States and Europe, as well as a separate account managed by 57 Stars dedicated to emerging market investments.

Guardian Life typically commits $200 million per year to the industry. Recent investments have gone to funds managed by Warburg Pincus, Huron Capital Partners, CCMP Capital Advisors and Levine Leichtman Capital Partners, according to a fourth quarter filing.