The private equity branch of Goldman Sachs has divested its stake in the hedge fund LMR Partners for a total value that could reach $258 million, in response to investor worries regarding the precision of asset valuations.

Petershill Partners, an investment firm that is predominantly owned by Goldman Sachs, reported that the sale price for its 18 percent ownership was “marginally higher” than the accounting valuation of $195 million noted at the end of the previous year.

The leadership at LMR initiated the deal with an initial cash disbursement of $107 million and is expected to proceed with a subsequent payment of $111 million. Additionally, there is a potential performance-based payment that could add up to $40 million.

Goldman Sachs established Petershill in 2007, successfully floating the division on the London Stock Exchange at 350p per share during a thriving IPO market in 2021. JP Morgan and Lazard had previously brokered stock purchases valued at £157.5 million and £129.5 million, respectively, while Goldman Sachs sold shares totaling £475.6 million. On Wednesday, shares of Petershill closed up by 3.5p at 219.5p.

According to FactSet, Goldman Sachs-managed funds remain the majority owners of Petershill with an aggregate stake of 79.5 percent. Meanwhile, Lazard has diminished its stake from 3.2 percent to approximately 0.85 percent, and JP Morgan has largely exited its investment after initially acquiring 3.9 percent.

The FTSE 250 entity’s shares are presently trading at about a 40 percent discount compared to the book value of its assets, raising questions among investors about the potential returns from its 26 minority stakes in private equity, hedge funds, and property investment managers.

David McCann, an analyst from Deutsche Bank, commented that the sale of LMR Partners illustrated Petershill’s ability to accurately assess its portfolio, primarily comprising firms active in private markets.

He noted, “This transaction could positively influence sentiment by addressing investor concerns regarding the group’s capability to monetize its stakes in portfolio entities. It appears to validate the valuation of the group’s portfolio assets, at least concerning this asset, which has been a significant concern for investors.”

JP Morgan analysts remarked that the transaction highlighted the “substantial value embedded” within Petershill’s array of minority stakes.

They suggested, “We anticipate that Petershill Partners may capitalize on the consolidation trends in the private markets asset management sector by realizing a higher value for one or more of its existing stakes if its partner firms undergo mergers or acquisitions.”

Ali Raissi-Dehkordy and Robert Hamilton Kelly, co-heads of Petershill, stated that the decision to divest from LMR aligns with their strategy to pivot from hedge funds towards private markets, which they view as a sector ripe for continued growth.