Washington State Investment Board Moves to Revise Secondary Policy

By David G. Barry


The Washington State Investment Board (WSIB) is poised to become more active in secondary transactions involving its private equity managers.

Under a proposal passed by its Private Markets Committee and set to be reviewed by the full board, the $151.7 billion agency would be able to invest significantly more capital in secondary transactions – and do so much quicker.

The move comes at a time when secondary transactions, especially those led by general partners are on the rise, and may provide fodder for other institutional investors who are struggling to react appropriately. According to data presented to the committee from Jefferies Global Secondary Market Review, there were $132 billion of secondary transactions in 2021 – a 120% increase over the $60 billion in secondary transactions done in 2020.

The $132 billion done in 2021 was split almost equally between LP-led secondaries, where institutional investors are selling stakes in private equity funds, and GP-led secondaries, where private equity and venture capital firms are maintaining control of portfolio companies but are perhaps seeking to extend a fund’s duration, provide LPs with liquidity or attract new capital.

WSIB’s new policy would apply to both LP- and GP-led secondary transactions but is really aimed at addressing the surge in GP-led secondaries. Between 2016 and 2021, such deals grew from $9 billion to $67 billion, according to the Jefferies report. So-called continuation funds – aimed at enabling firms to continue ownership of a portfolio company – account for some 84% of these transactions.

Many LPs, however, opt to not take part in GP-led secondary transactions, electing, according to WSIB’s presentation, to sell around 80% of the time. This data, said WSIB’s staff, suggests that LPs are selling not because of economic reasons but rather because of policy, timing or bandwidth constraints. The new policy, it said, would provide staff with more authority and streamline the process so that GP-led secondary elections are based on “economic considerations.”

WSIB said it has made elections in more than $1 billion of GP-led secondary transactions since 2017, including investing $192 million in Nordic Capital CV1. However, when an unfunded commitment is part of the transaction, WSIB said it has elected to sell in each case.


WSIB’s new policy is particularly noteworthy in that it would allow the plan’s secondary activity to grow with the overall private equity program rather than be limited to a set dollar amount.

Currently, the WSIB’s CEO has the authority to invest up to $500 million annually in secondary market opportunities in limited partnership managed by general partners with whom the plan has an existing relationship. It also is limited to investing no more than $200 million in such transactions and needs approval from its consultant.

The new policy – which will be weighed by the full board on June 16 – would grant the CEO authority to invest annually in secondary transactions up to an amount equal to 10% of the greater of the three most recent approved private equity annual plans. Aaron Daley, a WSIB assistant senior investment officer, said that figure would be $780 million, which would represent a 50% increase over the current $500 million.

The new policy would also increase the amount that could go into a single investment to 5% of the greater of the three most recent approved PE annual plans. Daley pegged that figure at $390 million – or what he said is basically equal to the $400 million that WSIB generally commits to private equity funds.

The new policy also would eliminate the need for the plan’s private equity consultant to be involved. Authority for the deal would rest with the chief investment officer and the private equity senior investment officer.


The Private Markets Committee also recommended to the full board a pool of investment consultants to serve the needs of the agency’s tangible assets investment team. The consultants that were recommended were Askia LLC, Callan LLC, Hamilton Lane Advisors LLC, Meketa Investment Group Inc. and Mercer LLC. All the proposed consultants are part of WSIB’s existing consultant pool for tangible assets. It too will be considered at the June 16 meeting.

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