LP corner, week of Nov. 23, 2009

Bids for Stanford assets due last week

Stanford University hasn’t had any recent capital calls lately, but the endowment is getting close to raising about $1 billion to make its commitments.

As of last Thursday, Stanford had received bids that the Wall Street Journal reported exceeded $1 billion for the portfolio that Stanford had put up for sale in October. Stanford does not plan to sell majority stakes in its partnerships, but rather minority positions that would enable it to maintain relationships with its general partners.

“This is the transaction everybody is watching,” said Philip Yau, managing director of UBS Private Funds Group. Yau made his comments to PE Week last week while at the Buyouts West conference in Beverly Hills, Calif.

Yau said the portfolio sale on the secondary market is being driven “completely by the upcoming next couple of years of capital calls.” He estimated that the university needs to raise from $700 million to north of $1 billion, despite having already raised $1 billion in a bond offering last spring.

“The portfolio is a very good portfolio on the private equity side,” Yau said. “Stanford sold most of its venture portfolio. So what’s left is buyout and some venture. That said, we think pricing will ultimately be between a 20% and 30% discount off the last set of numbers.”

Yau added the UBS is neither bidding on the funds nor advising Stanford. Cogent Partners is managing the process. —Deborah Gage

Florida may buy stake in PE firm

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 valuation work regarding the opportunity. A final decision is expected in less than 60 days, according to 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.

Several private equity firms have sold a piece of themselves over the past few years. The most recent example is BNY Mellon Asset Management, which acquired a 20% stake in New York-based fund-of-funds manager Siguler Guff & Co., which has more than $8 billion in assets under management.

The California Public Employees’ Retirement System holds stakes in a number of private equity firms. Last year, the state pension fund paid $275 million for a 9.9% stake in Silver Lake Partners, a technology specialist based in Menlo Park, Calif. CalPERS receives a share of the firm’s fees and profit, a seat on the GP’s management board, and the opportunity to co-invest in deals with Silver Lake.

CalPERS also holds a 10% stake in Apollo Management, a 5.5% stake in The Carlyle Group; 25% of Conversus Capital; and a 10% 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. —Nancy Gordon

Arkansas LP commits to Riverside

The Arkansas Teachers’ Retirement System recently pledged up to $40 million to the latest fund of health care and technology investor Riverside Partners.

Consultant Franklin Park recommended the commitment to Riverside Fund IV, which has a target of $250 million.

Since establishing its private equity program in 1996, the $10 billion state pension fund has made commitments to 19 primary funds and four funds of funds. Eight vehicles have been added since March 31, 2009. So far in 2009, $145 million has been committed to private equity. Earlier this year, the LP pledged a total of $40 million to Insight Private Equity Investment ($25 million to Insight Equity II and $15 million to Insight Mezzanine I); and up to $40 million to TA Associates’ TA XI LP, a fund with a mid-market growth strategy.

Other fund managers backed by the Arkansas Teachers’ Retirement System include Cinven, Oak Hill Capital Partners and Westbrook Partners.

The LP has a target allocation to private equity of 10%, with a range of 7% to 13 percent. As of August 2008, the actual private equity allocation stood at 6.3 percent. —Nancy Gordon

Jacksha appointed interim CIO after Bland’s resignation

New Mexico Gov. Bill Richardson appointed Bob Jacksha interim state investment officer for the state investment council, a significant backer of buyout funds, following the resignation of Gary Bland.

Jacksha, CIO of the New Mexico Educational Retirement Board, will serve as interim state investment officer during the LP’s search for a new CIO. He previously served as deputy state investment officer for the state investment council.

Bland resigned on Oct. 21, without explanation, after learning that the council intended to render a no-confidence vote against him, according to a source with knowledge of the situation. Upon learning of the council’s intentions, Bland consulted with Richardson on how the governor wanted to proceed, and then tendered his resignation, said the source.

Until April, the state investment council had used Aldus Equity Partners as its private equity consultant: Aldus Equity founder Saul Meyer, in pleading guilty in connection with a kickback scheme in New York, recently admitted to ensuring that “Aldus recommended proposed investments that were pushed on him by politically connected individuals in New Mexico.”

The role of the state investment officer is broader than that of CIO because it combines the duties of a CIO and a chief administrative officer. Jacksha said he does not know if he would take the job on a permanent basis if it were offered. “There are some open questions about the position, from the length of the term to the structure of the office moving forward; thus, it would be premature for me to comment any further,” he said. —Nancy Gordon