Two Canadian pension funds have shelved efforts to sell private equity fund stakes after valuations missed expectations, according to people familiar with the matter.
Canada Pension Plan Investment Board has halted a process it began earlier this year to sell fund stakes anticipated to be worth about US$1.5 billion, the people said, asking not to be identified because the matter is private. Additionally, Caisse de Depot et Placement du Quebec suspended an undertaking it started in February to sell an estimated US$1.5 billion of Chinese private equity assets, the people said.
The pensions, which had both been advised by Greenhill & Co. on the potential sales, stopped the processes recently as buyers offered to take the portfolios at discounts deeper than their expectations, the people said.
The La Caisse portfolio, which includes funds managed by HSG, formerly known as Sequoia Capital China, Warburg Pincus and Boyu Capital Investment Management, was priced at a 50% discount by some buyers, one of the people said.
Middle Eastern sovereign wealth fund Abu Dhabi Investment Authority was the lead bidder, the people said. It isn’t clear what price the fund was considering.
While such reassessments aren’t unusual, the decisions underscore investors’ sustained wariness of Chinese assets. Funds investing in China have been trading at heavy discounts, weighed down by risks including a slowing economy, though 50 per cent would be relatively steep. Some China-focused funds could see discounts of 30 per cent depending on the portfolio, Xuanyi Liu, private funds partner at law firm Morrison Foerster, said in February.
Meanwhile the CPPIB portfolio, which consists of Asia funds such as those managed by Hillhouse Investment, Bain Capital and PAG, includes assets that have been performing well recently, prompting a reconsideration of the need to sell them at this time, the people said.
Among them is publicly traded Kioxia Holdings Corp., which Bain invested in several years ago, one of the people said. Shares of the Tokyo-based flash memory maker have jumped more than 300 per cent this year as part of the artificial intelligence boom.
CPPIB, La Caisse, Abu Dhabi Investment Authority, Greenhill, HSG, Bain, PAG and Warburg Pincus declined to comment. Boyu and Hillhouse didn’t respond to requests for comment.
A potential recovery in China assets is also leading the pension funds to rethink the timing of sales, the people said.
With assistance from Alex Dooler and Layan Odeh