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Kaiser plans to sell $3.5 billion in private equity funds

Written on May 16, 2024

Kaiser Permanente plans to sell up to $3.5 billion of holdings in private-equity funds due to cash constraints, according to Wall Street Journal. 

Kaiser is working with investment bank Jefferies Financial Group to offload up to $3.5 billion of stakes to secondary buyers, but a company spokesperson said that the recent shift in investment out of private equity is not driven by liquidity concerns.  

"Rather, our investment decisions have been driven by our regular review of our portfolio and our ongoing work to balance our investments, including shifting from private equity into other asset classes — public equity, fixed income and bonds — when that makes sense," Kaiser said in a statement. "To be clear, over the past five years, our private equity return has exceeded comparable return in public and other markets. From 2022 through 2023, we reduced our private equity allocation by about 1%." 

At the end of 2022, Kaiser and its respective subsidiaries held almost $100 billion of investments, most of which were made through its pension system, according to the Journal. Illiquid alternative assets, which can include private equity, real estate and infrastructure investments, made up about 57% of the system's investment portfolio at that time. 

Kaiser said it manages its investment portfolio and makes investment and allocation decisions to maximize the support of its mission. The system's investment portfolio supports its employee retirement and pension program as well as its work to meet the needs of members, drive affordability, and improve the health of its communities.  

"This requires that we are a long-term investor and not driven by short-term performance or liquidity requirements. We make investment decisions that are informed by a wide variety of considerations," Kaiser said in a statement. 

In the first quarter, the health system reported $935 million in operating income (3.4% margin), up from $233 million (0.9% margin) in the first quarter of 2023. Net income excluding the Geisinger acquisition was $2.7 billion and $7.4 billion including it, compared to a net income of $1.2 billion in the first quarter of last year.  

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