Facing Possible Liquidity Issues, Stanford Initiates Private Equity Sale

(October 8, 2009) – Following similar actions at other top-tier university endowments, Stanford University has initiated a fire sale of up to 20% of its private equity holdings.

According to numerous sources, the university—which ai5000 reported in June was having liquidity issues—is looking to free upward of $1 billion from the sale, which would take place in secondary markets via Cogent Partners. Standing at $17.2 billion, according to the aiGlobal 500   list of the world’s largest asset owners, the endowment invests in alternatives ranging from private equity to real estate to timber. The sale would attempt to offload Stanford’s stakes in private equity firms, as opposed to specific investments in private equity deals, reports The New York Times. Earlier this year, Stanford raised $1 billion through a taxable bond offering.

The move can hardly be deemed unexpected, despite Stanford’s claim that it does not need the money. Late last year, facing similar liquidity problems despite an even larger endowment, Harvard put upward of $2 billion in private equity holdings on the market. That sale, reports revealed, met with only limited success. Similarly, the California Public Employees’ Retirement System (CalPERS) has had minimal success in selling a portion of its alternatives stake.

Endowment spectators surely will watch the sale closely. If the stakes are sold quickly, it will be a sign that the market for such investments—decimated as of late, as indicated by the attempted Harvard sale—has rebounded. If Stanford is unable to offload the holdings, however, it will likely cause furrowed brows across the endowment universe. Earlier this year, such deals were seeing assets sold at less than 30 cents on the dollar, according to Nyppex, a market research firm. While this figure has risen as of late, the figures will be watched closely.