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CalPERS Acquires 9.9% of Silver Lake
California pension fund's investment mirrors trend by institutional investors to participate in more PE activity.
January 9, 2008
The California Public Employees Retirement System (CalPERS) is continuing to build its direct investment business, acquiring a minority stake in Silver Lake.
Under terms of the deal announced by Silver Lake on Wednesday, CalPERS has taken a 9.9% interest in Silver Lake, a private equity firm based in Menlo Park, Calif., and New York, for an undisclosed sum. The nation's largest pension fund may also commit additional capital to Silver Lake's funds as well as serve as a co-investor in its transactions.
Although financial details were not disclosed, CalPERS' stake is reportedly valued at $275 million and places a $2.7 billion valuation on the investment group known for its technology investment focus.
A Silver Lake spokesperson declined to confirm whether the figures as reported by the New York Times were correct.
In December, Silver Lake announced it had invested $200 million in Wall Street research house Gerson Lehrman Group and had hired former Cisco Systems executive Charles Giancarlo as a managing director.
For Sacramento, Calif.-based CalPERS, the investment isn't a big surprise. The pension organization, which manages pension and health benefits for 1.5 million California employees and retirees, purchased a minority stake in Washington's Carlyle Group for $175 million in 2001.
While there have been rumblings that institutional investors may be less committed to private equity in 2008 against the backdrop of the credit market retrenchment and declining return expectations, CalPERS has decided to take the opposite approach. Besides the new investment in Silver Lake, it has increased its allocation to private equity and venture capital, which are lumped together under its alternative investment management program, to 9.3% from 6%.
CalPERS generated a not-too-shabby 30% return from commitments to the alternative asset class (leveraged buyouts represent its largest alternative investment allocation) from October 2006 through Sept. 30, 2007.
The investment by the pension manager mirrors an ever-increasing trend on the part of institutional investors to participate more fully in private equity investment activity, either by investing directly in general partnerships or leveraged buyouts.
Evercore Partners served as financial advisor to Silver Lake, which relied on Simpson Thacher & Bartlett for counsel.
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