Several Ivy League endowments, including Harvard and Yale, are exploring or executing secondary market sales of ageing private equity holdings in response to mounting funding pressure and looming US tax reforms, according to the Financial Times.

Sources indicate that at least four universities are actively pursuing transactions to generate liquidity ahead of anticipated changes to investment income tax, which could jump from 1.4% to as high as 21% for the richest institutions. The urgency is compounded by falling private equity distributions, which dropped to just 11% of net asset value in 2024, down from 29% during 2014–2017, according to Bain & Company.

Harvard Management Company is reportedly considering the sale of approximately $1bn in private equity assets to strengthen liquidity and ensure capital availability for future commitments. Yale, meanwhile, has attempted to offload venture and growth fund stakes with more established buyout assets bundled in to entice buyers, but has so far received few competitive offers.

One endowment executive disclosed that recent pricing hovered around 80 to 85 cents on the dollar. Another institution increased its cash allocation from 3% to 5% in recent months to navigate capital calls and potential budget demands.

While some endowments have other tools available, such as bond issuance – Harvard has raised $1.2bn this year alone – many are reluctant to part with assets at heavy discounts. Nonetheless, secondary sales are expected to continue in a controlled manner, with some funds anticipating additional disposals over the coming quarters.

The strategic use of the secondaries market reflects the long-term viability of private equity in institutional portfolios despite current liquidity constraints. A university CIO summed it up: “We want realisations to increase and distributions to increase. That’s the only real long-term solution.”

Source: Financial Times

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