The Florida State Board of Administration may steal a page from another big state institution’s playbook by making an investment directly in a private equity firm. It has hired an adviser to vet just such a proposal.
The state has engaged advisory firm Evercore Partners to perform due diligence and a valuation work regarding the opportunity. A final decision is expected in about 60 days, said spokesperson Dennis MacKee, who declined to discuss the possible size of the investment because he did not want to comment during the due diligence period.
The potential investment is one component of the limited partner’s plan for its strategic investments portfolio for the fiscal year ending in June 2010, according to board documents. The state’s strategic investments can include, among other things, distressed debt, mezzanine debt, commodities, timberland, infrastructure and hedge funds. The Florida State Board of Administration manages more than $120 billion in assets for several state and local funds and endowments.
Buyout shops have occasionally sold stakes in their management companies to generate liquidity for partners or for a capital infusion that allows them to expand operations. Buyers, for their part, are often looking for better terms and conditions, including a share of the carried interest, and of course a return on their investment.
Several private equity firms have sold a piece of themselves over the past few years. The most recent example is BNY Mellon Asset Management acquiring a 20 percent stake in New York-based fund-of-funds manager Siguler Guff & Company, which has more than $8 billion in assets under management. The firm manages funds-of-funds targeting distressed security investing; emerging markets, including Brazil, Russia, India and China; distressed real estate; and small-cap buyout funds.
The king of the strategy is the $200 billion California Public Employees’ Retirement System, which holds stakes in a number of private equity firms. Last year, the limited partner paid $275 million for a 9.9 percent stake in Silver Lake, a technology specialist based in Menlo Park, Calif. CalPERS receives a share of the firm’s fees and profits, a seat on the GP’s management board, and the opportunity to co-invest in deals with Silver Lake.
CalPERS also holds a 10 percent stake in Apollo Management LP, a 5.5 percent stake in The Carlyle Group; 25 percent of Conversus Capital; and a 10 percent stake in Thomas Weisel Partners. The LP also bought a minority stake in TPG Ventures for $60 million in 2001, although the exact ownership position in the firm was not disclosed. It also paid about $240 million for a stake in Audax Group.
In 2007, the Chinese government paid $3 billion for a non-voting minority stake in The Blackstone Group. The government of Abu Dhabi, through its Mubadala Development Corp., paid $1.35 billion for a 7.5 percent stake in The Carlyle Group, and the Abu Dhabi Investment Authority bought stakes in Apollo Management and Ares Management LLC.