US - CalPERS is back in the market for stakes in private-equity funds after selling US$2bn of partnerships earlier this year.
CalPERS sold stakes in 80 partnerships managed by 60 firms at the end of 2007, likely for higher prices than what they'd get now, Shahinian said.
"If we tried to pull that off in today's market, the indication is that we would've suffered hundreds of millions in losses," Shahinian said. "The supply-demand equation has changed dramatically."
A flood of secondary private-equity interests has hit the market as investors dump holdings to raise cash. The market for such secondary interests may balloon to more than $100bn next year, while funds raised to buy such stakes total less than $20bn, said David DeWeese, a general partner at Paul Capital Partners in New York, which manages $6.6bn in investments.
DeWeese and other secondary-fund managers said some sellers are shopping fund interests at discounts of 50% or more.
Banks and investors are refusing to finance leveraged buyouts of $5bn as they hoard cash amid the global financial crisis. Announced deals fell 70% this year to $201bn from the same period last year, according to data compiled by Bloomberg. Private-equity returns have shriveled as fewer companies are bought and sold and the value of companies owned by buyout firms declines along with public equities.
Blackstone Group LP, manager of the world's largest buyout fund, had a third-quarter loss of $502.5m, its biggest since going public in June 2007, the New York-based firm said on 6 November.
"The macro issue is a complete elimination of liquidity in the marketplace, and it's not just in private equity," Shahinian said.
Preqin Ltd., a London-based research firm, published an analysis of the CalPERS private-equity sales yesterday that said more than half the sales were stakes in venture-capital funds, while about a quarter were buyout fund interests.
The sales of private-equity interests stemmed from a decision in late 2005 to reduce the number of managers CalPERS invested with, Shahinian said. The fund hired UBS AG to analyze its portfolio and began selling the stakes last year.
Shahinian declined to disclose the sellers or the prices CalPERS got for the private-equity interests.
Private-equity managers including Blackstone and KKR & Co. LP said they wrote down the value of some investments during the most recent quarter. The writedowns of those underlying holdings ultimately reflect a lower value for the fund that made the investment.
CalPERS slashed its stock holdings during the third quarter, according to a 13 November regulatory filing. The number of stocks it sold off entirely rose more than ninefold to about 800 in the third quarter, including Berkshire Hathaway Inc., Apple Inc. and Bank of America Corp.
"As with many other investors, it is likely that CalPERS has liquidity issues," Preqin's Etienne Paresys said in the statement today.
CalPERS had its worst performance in six years in the 12 months ended 30 June as stocks fell worldwide; further declines have cut the fund's value by more than 20% since then. The pension fund has $182.5bn in assets under management, down from about $255bn one year ago.
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