Canadian pensions in top 10 of the world's private equity investors. Why are they selling now?

financialpost.com:

Canadian pension funds bulked up on private equity investments for their attractive returns over the past couple of decades, but changing dynamics in the PE sector and volatility in public markets are now leading some to reverse course and put holdings on the block.

The Canada Pension Plan Investment Board, for example, which invests on behalf of the Canada Pension Plan, sold a diversified portfolio of limited partnership fund interests in mostly North American and European buyout funds to French private investment house Ardian for around $2 billion on Nov. 7. The portfolio represented various commitments made by CPP Investments over the past 20 years.

The next day, Bloomberg News reported that the Caisse de Depot et Placement du Quebec is shopping private equity assets, also valued at as much as $2 billion.

There are several factors that could be contributing to the selling spree, according to people who track such fund investments.

The first is what’s known as the “denominator effect.” This occurs when the value of bonds and shares of publicly listed firms decline, as they did recently, bringing down the total assets of a pension fund. When this happens, reported values for private assets tend to lag their public counterparts, which results in these private assets becoming a larger proportion of a fund’s total assets.

“Selling part of the private equity portfolio is a way to bring the total portfolio back to balance,” said Sebastien Betermier, an associate professor of finance whose area of focus at McGill University includes pensions and other funds.

Betermier said recent “benchmarking” research he and colleagues have done shows a smoothing and lagging effect for private asset valuations when compared to publicly