Two Canadian pension funds have suspended efforts to sell private equity fund stakes after valuations fell short of expectations, according to people familiar with the matter. The Canada Pension Plan Investment Board (CPPIB) halted a process initiated earlier this year to sell fund stakes anticipated to be worth approximately US$1.5 billion. Similarly, Caisse de Depot et Placement du Quebec (La Caisse) stopped an undertaking started in February to sell an estimated US$1.5 billion of Chinese private equity assets.
Valuation Disappointments
Both pension funds, advised by Greenhill & Co., stopped the processes recently as buyers offered to take the portfolios at discounts deeper than their expectations. The La Caisse portfolio, which includes funds managed by HSG (formerly Sequoia Capital China), Warburg Pincus, and Boyu Capital Investment Management, was priced at a 50% discount by some buyers, one of the people said. The Abu Dhabi Investment Authority was the lead bidder, though the price it considered remains unclear.
Market Wariness
While such reassessments are not unusual, the decisions underscore investors' sustained wariness of Chinese assets. Funds investing in China have been trading at heavy discounts due to risks including a slowing economy. A 50% discount would be relatively steep; some China-focused funds could see discounts of 30% depending on the portfolio, according to Xuanyi Liu, private funds partner at law firm Morrison Foerster.
Performance Considerations
Meanwhile, the CPPIB portfolio consists of Asia funds managed by Hillhouse Investment, Bain Capital, and PAG, including assets that have been performing well recently. Among them is publicly traded Kioxia Holdings Corp., in which Bain invested several years ago. Shares of the Tokyo-based flash memory maker have surged more than 300% this year due to the artificial intelligence boom. This strong performance prompted a reconsideration of the need to sell at this time, the people said.
Future Outlook
A potential recovery in Chinese assets is also leading the pension funds to rethink the timing of sales. CPPIB, La Caisse, Abu Dhabi Investment Authority, Greenhill, HSG, Bain, PAG, and Warburg Pincus declined to comment. Boyu and Hillhouse did not respond to requests for comment.
