One of the world’s most famous universities, Harvard University, is close to selling its private equity holdings. The university is also planning to unload some of its venture capital and real estate funds at the same time. According to the reports, the assets the university is looking to unload are worth well over $2 billion.
Plans are emerging about the possible deal
Harvard’s funds have been performing rather poorly in the past. A number of these funds are over a decade old and therefore, some of them will be attached with a big discount price tag. According to the sources speaking to Bloomberg, certain funds will only deliver single-digit annual returns.
Sources suggest Harvard Management Co., which looks after the $35.7 billion endowment for the university, is currently in talks with Lexington Partners. The investment-banking firm is interested in buying stakes in the venture capital and buyout funds. According to the same sources, the portfolio Lexington Partners is looking to buy includes a number of funds. These include venture capital and buyout funds such as Kleiner Perkins Caufield & Byers, Ignition Partners, Arsenal Capital Partners and JLL Partners.
Harvard has reportedly hired Cogent Partners, a unit of Greenhill & Co., to finalise the deal. According to the sources, the deal includes $1 billion in private equity and venture capital and $1.6 billion worth of real estate investments.
In addition to the deal with Lexington Partners, the university is rumoured to be talking with Landmark Partners about the real estate investments. None of the parties involved have so far made any official comment on the possible deal.
Harvard’s private equity portfolio used to be the talk of the town. Its PE funds used to be the top performer in the university’s endowment, but the last decade has seen the funds lag behind. According to the annual reports, the private equity fund has been trailing behind benchmarks, causing the new management to consider a sale.
Indeed, Harvard is currently undergoing a massive overhaul. Harvard Management’s new chief executive office, N.P ‘Narv’ Narvekar, has made big changes in the university’s management department and the plans to unload $2 billion worth of funds wouldn’t really be a surprising strategy. Narvekar took over in December and he has already decided to lay off around half of the staff at the Boston-based non-profit. Narvekar also wants to shutter internal hedge funds and sell stakes in funds, as well as direct holdings, in natural resources.
Furthermore, the current plans to sell private equity investments wouldn’t be the first for Harvard. During the credit crises in 2008, the university sold over $1 billion worth of private equity interests in its efforts to reduce illiquid assets in the endowment. The sale was another discount shopping opportunity for interested buyers. It will be interesting to see what kind of price tag will be finally attached to the deal this time and whether other interested buyers emerge in the final moments.