Key Takeaways
- • Caisse de dépôt et placement du Québec (La Caisse), a major Canadian pension fund, has launched a US$1.5 billion secondary sale of LP stakes in China-focused private equity funds, marking a direct test of investor appetite in a challenged market.
- • The portfolio comprises stakes primarily in funds managed by HSG (formerly Sequoia Capital China), Warburg Pincus, and Boyu Capital Investment Management, with Greenhill & Co. serving as financial advisor.
- • China-focused private equity funds are trading at discounts as steep as 30 percent, reflecting weak deal activity and persistent geopolitical concerns that continue to deter secondary buyers globally.
- • Asia LP-led secondary deals totaled approximately US$5 billion in 2025, representing only 4 percent of the US$125 billion global LP-led secondary market, while the broader secondary market (including GP-led deals) surged 48 percent to US$240 billion globally.
- • La Caisse retains flexibility to execute a partial sale depending on market conditions and pricing, signaling that institutional investors are selectively managing China exposure rather than pursuing full exits.
Summary
Caisse de dépôt et placement du Québec, one of Canada's largest pension managers, initiated a secondary sale process in early February 2026 to test pricing and investor demand for approximately US$1.5 billion in China-focused private equity fund stakes. The portfolio consists primarily of LP interests in strategies managed by HSG (the rebranded Sequoia Capital China), Warburg Pincus, and Boyu Capital Investment Management. Greenhill & Co. was retained to advise on the transaction, which reflects La Caisse's broader strategy to manage its global private equity portfolio through secondary market mechanisms.
The timing of this sale reveals significant headwinds in China private equity valuations. Secondary buyers continue to demand substantial discounts—ranging as high as 30 percent depending on the portfolio composition—reflecting depressed deal activity in China and lingering geopolitical uncertainty. According to Xuanyi Liu, private funds partner at Morrison Foerster, global secondary investors remain disciplined and cautious in their approach to acquiring LP stakes in China-focused funds. This buyer restraint has compressed valuations across the sector.
La Caisse's statement emphasized that secondary markets represent one of several portfolio management tools and that the pension fund continues to focus on liquid markets within China investments. Notably, the fund may proceed with only a partial sale of the portfolio, contingent on achievable pricing levels and broader market conditions. This optionality underscores the challenging backdrop for China-denominated PE secondary transactions.
Market data illustrates the peripheral role of Asia in global secondary activity. According to a January report by Jefferies Financial Group, Asia LP-led secondary deals totaled approximately US$5 billion in 2025, accounting for just 4 percent of the US$125 billion global LP-led secondary market. However, the broader secondary market, encompassing both LP-led and general partner-led transactions, expanded 48 percent year-over-year to US$240 billion globally, indicating that secondary activity remains robust in developed markets while China exposure faces structural challenges.
The timing of this sale reveals significant headwinds in China private equity valuations. Secondary buyers continue to demand substantial discounts—ranging as high as 30 percent depending on the portfolio composition—reflecting depressed deal activity in China and lingering geopolitical uncertainty. According to Xuanyi Liu, private funds partner at Morrison Foerster, global secondary investors remain disciplined and cautious in their approach to acquiring LP stakes in China-focused funds. This buyer restraint has compressed valuations across the sector.
La Caisse's statement emphasized that secondary markets represent one of several portfolio management tools and that the pension fund continues to focus on liquid markets within China investments. Notably, the fund may proceed with only a partial sale of the portfolio, contingent on achievable pricing levels and broader market conditions. This optionality underscores the challenging backdrop for China-denominated PE secondary transactions.
Market data illustrates the peripheral role of Asia in global secondary activity. According to a January report by Jefferies Financial Group, Asia LP-led secondary deals totaled approximately US$5 billion in 2025, accounting for just 4 percent of the US$125 billion global LP-led secondary market. However, the broader secondary market, encompassing both LP-led and general partner-led transactions, expanded 48 percent year-over-year to US$240 billion globally, indicating that secondary activity remains robust in developed markets while China exposure faces structural challenges.
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