CalPERS buys stake in Silver Lake

The California Public Employees’ Retirement System in January announced that it has agreed to acquire a 9.9% ownership position in tech-focused private equity firm Silver Lake Partners. No financial terms were disclosed, although some press reports say that CalPERS paid about $275 million.

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, according to Silver Lake, which has about $16 billion in fund assets.

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 addition to Silver Lake, CalPERS has a 10% stake in Apollo Management and a 5.5% stake in The Carlyle Group. Both of those buyout firms 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. —Alastair Goldfisher