Montana bids adieu to First Reserve, Madison Dearborn through $120 mln secondary sale

Montana sold the fund stakes to two buyers across three transactions that closed during the second quarter, according to state documents. The Montana Board of Investments, which manages $9.7 billion of state retirement assets, realized 106 percent of the net asset value of the funds.

In April, the board disclosed that it would sell stakes in funds managed by four general partners that it would not invest with moving forward. Montana previously disclosed that the sale would include its stakes in funds managed by First Reserve and Madison Dearborn. The sale likely included stakes in GTCR and Hellman & Friedman funds as well.

Meeting materials indicate that staff removed all four GPs from its list of active managers. Montana’s previously disclosed commitments to GTCR X, Hellman & Friedman Capital Partners VI and Hellman & Friedman Capital Partners VII do not appear in the board’s latest performance update.

The “funds chosen for sale were among those we would not be pursuing an ongoing strategic relationship with and were not ‘troubled.’ Some were deemed popular and did enjoy high demand,” according to April 8 meeting minutes.

A Montana spokesman did not respond to a request for comment. Spokespeople for First Reserve, Hellman & Friedman and Madison Dearborn declined to comment. A spokeswoman for GTCR did not respond to a request for comment.

Several limited partners have tapped the secondary market in recent years to generate liquidity from older commitments and to reduce the number of active managers in their portfolios. Secondary deal volumes through October hit a record $28 billion transacted, according to a report from private equity advisor Triago released earlier this month.

“The sale was successful because of favorable market conditions of plentiful liquidity, a recent positive return backdrop in the public equity markets combined with low volatility, and a large amount of dry powder on the part of secondary funds,” according to an investment memo written by Montana CIO Clifford Sheets. “We should not rely on this type of asset sale in the future, but this example shows that selling such assets is quite doable and thus a definitional distinction between liquid and illiquid assets is not pure.” 

In addition to announcing its secondary sale, Montana disclosed three new commitments to private equity and venture capital in its meeting materials. Montana’s largest commitment, $20 million, went to Centerbridge Partners third flagship fund, which closed on $6 billion in October.

The Montana Board of Investments also committed $15 million to Tenaya Capital’s latest venture fund and $10 million to Spire Capital’s newest lower middle-market buyout vehicle.