British Columbia Investment Management Corp. is selling more than US$1-billion of stakes in private equity funds to French buyout firm Ardian SAS, tapping the secondaries market for private assets to free up cash for new investments.
A spokesperson for Ardian confirmed the transaction, but declined to comment further. A spokesperson for BCI declined to comment. Neither Ardian nor BCI disclosed which of BCI’s private-equity holdings are changing hands in the transaction.
The transaction between BCI and Ardian was first reported by Bloomberg News.
BCI regularly sells its interest in funds in secondaries markets, which allows the $233-billion pension fund manager to rebalance the size of its private equity portfolio relative to the rest of its assets, and to redeploy capital to new investments.
The secondaries market for private investments allows fund investors – the limited partners that pledge money to a fund managed by a general partner, and share in its returns – to buy and sell stakes in illiquid funds before those investments are realized, usually at a discount. That has become an increasingly important tool for large institutional investors to create liquidity from some of the private assets they own. As high interest rates have driven up borrowing costs and depressed company valuations, institutional investors are looking for ways to free up cash without waiting for the backlog of stalled private equity deals to clear.
Major Canadian pension funds have regularly tested the market for secondaries in recent years, but the greater clarity around the path of interest rates – and the prospect of possible rate cuts from central banks starting later this year – has more recently made it easier for buyers and sellers to agree on prices.
BCI’s private equity portfolio was worth $28.3-billion, and accounted for about 13 per cent of the pension fund’s total assets as of March 31, 2023. That was up from 11.8 per cent a year earlier. BCI has yet to report financial results for its latest fiscal year, which ended in March.
Ardian opened an office in Montreal last year in an effort to increase its investing in the country, particularly in sectors such as renewable energy. It is one of the most active and prominent players in secondaries, and last year purchased a US$2.1-billion portfolio of private equity fund stakes from the Canada Pension Plan Investment Board, which included commitments to fund managers stretching back as long as 20 years.
Last September, the Caisse de dépôt et placement du Québec turned to the secondaries market to sell a portfolio of partial stakes in funds and co-investments for US$1-billion to Swiss private equity company Partners Group Holding AG.