The Beginning of the End of Artificially Good Times

From Bloomberg.

"A push by the richest U.S. universities to unload their stakes in private-equity funds is flooding the market, driving down prices for the world's best-known buyout firms.

"Investors led by Harvard University, which manages the largest U.S. endowment at $36.9 billion, may increase so-called secondary sales of private-equity funds to more than $100 billion during the next year, overwhelming available pools of capital. Interests in funds managed by KKR & Co., Madison Dearborn LLC and Terra Firma Capital Partners Ltd. all are being offered at discounts of at least 50 percent, according to people familiar with the sales.

"Crippled financial firms such as American International Group Inc. and bankrupt Lehman Brothers Holdings Inc. are joining strapped endowments such as the ones at Columbia University in New York and Duke University in Durham, North Carolina, in trying to sell private-equity stakes. A deepening global recession that is crimping the value of buyout firms' holdings is forcing further price cuts in a market where buyers already are scarce.

“'There's a huge supply-demand imbalance,' said David De Weese, a general partner at Paul Capital Partners in New York, which manages $6.6 billion. . . .

“'I don't know of any institution that's not looking at its portfolio and saying, "What can we do?”' said Frank Morgan, a partner at Coller Capital Ltd., a London-based firm that invests in buyout and venture capital funds.

"One financial institution recently held discussions about selling more than $100 million in private-equity stakes in a fund run by New York-based KKR at a discount of about 50 percent, a person briefed on the talks said. A sale hasn't yet been completed. . . ."

Much more at Bloomberg.