As buyout firms increasingly look to lock in their franchise values with stake sales, the California Public Employees' Retirement System has added a 9.9 percent stake in Silver Lake to its collection of buyout firm ownership interests. The largest US pension fund’s similar holdings include minority stakes in Apollo Management, The Carlyle Group and TPG Ventures, now called TPG Growth.
The price paid by the $250 billion (€170 billion) pension was not disclosed, nor were the amounts of new CalPERS commitments to Silver Lake funds that were part of the agreement. The New York Times, however, citing people briefed on the matter, valued the stake at $275 million. Under terms of the deal, a CalPERS representative will join the tech-focussed buyout firm’s advisory board.
“CalPERS’ commitment to Silver Lake underscores Silver Lake’s compelling track record as a leading technology-focussed investment firm and a top performer in their fund vintage years.” Leon Shahinian, senior investment officer of CalPERS Alternative Investment Management Group, said in a statement. “They have consistently demonstrated success in creating value for their investors, and our partnership is a natural progression of a mutually beneficial relationship dating from 1999 when CalPERS was an LP in Silver Lake’s first fund.”
Glenn Hutchins, co-founder and co-chief executive of Silver Lake, said the investment will help the firm’s growth.
Silver Lake, which currently manages more than $16 billion, also said the investment would provide seed capital for future funds, the development of new alternative asset businesses and expand its ability to co-invest with its funds.
CalPERS has been snapping up stakes in private equity firms with greater frequency as firms increasingly look to institutional investors for large capital infusions that effectively help establish the value of a firm’s management company.
In July, CalPERS paid $600 million for an 8.6 percent stake in Apollo prior to its listing on Goldman Sachs’ private trading platform. In 2001, the pension purchased a 5.5 percent stake in Carlyle and the same year it took a $60 million equity stake in TPG Ventures, as did the California State Teachers’ Retirement System and Oregon’s Public Employees Retirement Fund.
Large US pensions were also reported last May to be mulling the purchase of a stake in TPG, though at the time a source told PEO the possibility was at a very early, exploratory stage and – should anything come to fruition – TPG would likely sell a single-digit stake in line with industry precedents.
In addition to pensions, sovereign wealth funds have been purchasing alternative asset management firm interests with great appetite. In October 2007, Dubai International Capital bought a 10 percent stake in hedge fund Och-Ziff Capital Management, while in September 2007, Carlyle sold a 7.5 percent stake worth $1.35 billion to the Abu Dhabi Government fund, Mubadala. The Abu Dhabi government also backed Apollo last year, with a $1.5 billion investment for a 10 percent stake.
In some cases, such as The Blackstone Group’s sale of a $3 billion stake to China and Fortress Investment Group’s sale of an $888 million stake to Tokyo bank Nomura Holdings, the transactions have been precursors to management IPOs.