Kensington Capital Advisors said it has stopped redemptions at the Kensington Private Equity Fund in order to save money in a market where exits have been low and valuations have fallen.
The freeze starts right away and lasts for 90 days, but the fund’s governing terms allow it to be extended.
The stop applies to both pending requests and any new redemption orders that are filed during the stop.
Kensington said that the step was meant to keep portfolio holdings from being sold at lower prices, which is more likely to happen when mergers and listings slow down.
The company said it wants to protect long-term returns and set the vehicle up to reach its goals once the markets settle down.
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Starting on September 30, Kensington will lower the management fee by 10 basis points for all unit classes.
The company didn’t say how big the fund was or when withdrawals would be allowed to start again after the 90 day period. The manager said that as market conditions get back to normal, they will try to make the company more liquid.
When exit channels get smaller, you can test private equity funds that let you redeem your shares at certain times.
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When portfolio companies pay out less money, it makes it harder to meet withdrawals. Also, when holdings go down in value, it makes it harder to sell them at a fair price.
There are early signs of a thaw, such as reports that the IPO window has reopened in the US. However, deal flow is still uneven and the risk of deals not going through is still high.
Kensington said that the liquidity squeeze has been getting worse over the past three years. He pointed to historically low IPO and M&A volumes that have hurt private market pricing.
This has made it harder for the industry to raise money for new vintages, and it has made the trade-off for open-ended vehicles between honouring redemptions and keeping long-term value sharper.
The decision also comes at a time when bigger Canadian asset managers are pushing deeper into alternative investments. In March 2024, AGF bought 51% of Kensington.
Since then, it has been growing its private markets platform to include venture capital, growth equity, and mid-market buyouts.
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According to company materials, Kensington Capital Partners Limited, the larger company that manages the manager, oversees about $2.2 billion across a number of strategies.
