OCERS Sold the Only Part of Its Portfolio That Pays Cash

10 hours ago

3 min read

What's New

OCERS completed a secondary sale of 17 private fund positions for $231,417,549.40, disclosed in the written reports of its latest Investment Committee packet. The positions sold were the plan's legacy fund-of-funds book, managed by Adams Street, Abbott Capital, Mesirow and Pantheon, plus two Kayne Anderson energy funds. Staff describe the candidates as tail-end positions with limited remaining upside. Those positions are marked at 2.0x to 2.7x with returns of 12% to 18%, and have returned $1.38 for every dollar called. The programs receiving the proceeds have returned 19 cents and 3 cents respectively.

Why It Matters

Secondary sales by public plans are usually read as portfolio hygiene, and boards approve them on that basis. This one inverts the usual logic. The legacy book is the only segment of OCERS' private equity portfolio that has completed a full cycle and sent money home. The direct and co-investment programs, nine and five years old, have sent home almost nothing. Selling the first to fund the second is defensible as a strategy about the future. It is not defensible as a judgment about what has limited remaining upside, and the plan's own carrying values say so.

Big Picture Drivers

The two books sit at opposite ends of the cash spectrum: Legacy has called $2,361.8m and returned $3,268.5m for a 1.38x cash multiple, while the core direct program has called $2,727.8m and returned $525.8m for 0.19x.
The sold positions are the marked-up ones: Mesirow VI sits at 2.6x and 18.4%, Abbott Capital 2013 at 2.3x and 16.4%, Adams Street 2008 Direct at 2.7x and 15.0%, and Pantheon Multi-Strategy 2014 at 2.4x and 16.3%.
The stated rationale is about liquidity rather than value: Staff list the objective as generating liquidity to fund new commitments in a slow distribution environment, alongside the tail-end language.
That environment is documented in the same packet: The plan's consultant reports that the capital cycle has stretched to approximately seven years and that private equity assets under management roughly doubled between 2019 and 2024 while exit volumes remained flat.
The receiving book carries $2,216.4m of unfunded commitments: A 0.19x distribution rate against that obligation is why the plan needs the cash.
Nothing about the price is disclosed: There is no buyer, no reference net asset value, no discount or premium and no allocation of the $231.4m across the 17 lots, so whether the sale cleared at, above or below carrying value is unknowable from the document.

By The Numbers

$231,417,549.40 in total sale proceeds
17 fund positions sold, 13 of them fund-of-funds
1.38x cash returned per dollar called in the book being sold
0.19x in the core direct program being funded
0.03x in the co-investment program
2.0x to 2.7x the range of carrying multiples on the named private equity lots

Key Trends to Watch

Pricing disclosure is the gap that matters: A plan that discloses 17 fund names and a proceeds figure to the cent, with no reference value, has said enough to raise the question and not enough to answer it.
Fund-of-funds exits keep clearing while the marks are high: OCERS reduced legacy from 25% to 19% of program exposure in a year, and any plan that built exposure through intermediaries in the 2006 to 2014 window and has since built an internal team faces the same decision.
The liquidity math gets harder before it gets easier: Until the core program's distributions turn, every new commitment increases an unfunded balance that only secondary sales and legacy distributions can cover, and the legacy distributions are what just got sold.

The Wrap

Every allocator running a direct program eventually reaches this moment: the intermediated book has matured and is sending cash, the internal book is young and consuming it, and the only asset with a bid is the one that works. OCERS made a reasonable trade and described it in language its own numbers contradict. The thesis that the plan can underwrite better than Adams Street and Abbott could is testable, and the test is whether the core program's 0.19x becomes 1.0x on a comparable timeline. What the packet does not let anyone assess is whether the trade was executed well, because the price is missing. That number exists. Somebody at the plan knows it, and the next annual review is the natural place for it to appear.