This is the first time that Silver Lake, which has offices in New York and Menlo Park, Calif., has sold a piece of itself.
CalPERS, which will get a seat on Silver Lake’s advisory board, has also agreed to make additional investments as a limited partner in future Silver Lake funds. The investment in Silver Lake comes shortly after the state pension fund said that it would raise its allocation to private equity from 6% to 10% of its assets.
The investment from CalPERS will help Silver Lake expand internationally, create future funds and new alternative asset business opportunities, and allow Silver Lake to co-invest alongside its funds, said Silver Lake, which has about $16 billion in fund assets.
Glenn Hutchins, co-founder and co-CEO of Silver Lake, said in a statement: “The CalPERS investment and strategic partnership with us [brings] important long-term funding that supports expansion of our technology investment leadership. We are extremely pleased to have this vote of confidence from CalPERS as we focus on building out our successful platform to drive the future growth of Silver Lake and continue creating superior value for our investors.”
Some observers say that Silver Lake’s decision to sell a stake to CalPERS reflects the difficult times facing the private equity industry. After years of raking in huge profits from buyouts engineered with easy money, private equity firms are facing tougher times amid a credit crunch that’s raising questions about whether some of their past deals will sour and make it more difficult to finance additional acquisitions.
In buying the stake in Silver Lake, CalPERS now has investments in a handful of buyout groups, including a 10% stake in Apollo Management and a 5.5% stake in The Carlyle Group. Both Apollo and Carlyle also have recently sold stakes to the Abu Dhabi Investment Authority.
Silver Lake and CalPERS have a relationship that dates back to 1999 when the pension fund was an LP in Silver Lake’s inaugural fund, a $2.3 billion vehicle.