Shares of buyout firms that have gone public, like the Blackstone Group, have been battered badly. On Tuesday, Blackstone’s shares fell to their all-time low, down 7.3 percent, to $18.
Even so other private equity firms have been seeking to go public or sell stakes to outside investors. Within the past year, Kohlberg Kravis Roberts filed for an initial public offering, Apollo Management sold a 9 percent stake to Abu Dhabi Investment Authority, and the Carlyle Group sold a 7.5 percent stake to Abu Dhabi as well.
The investment by CalPERS in Silver Lake is clearly a vote of confidence in the firm, which is increasing its presence internationally, at a time of uncertainty. CalPERS, which has been an investor in Silver Lake’s funds since 1999, has taken stakes in rival funds, among them Apollo and Carlyle.
CalPERS invests in these firms directly, not just in their funds as a limited partner, giving it access to the 20 percent of the profits and 2 percent of the fees that the firms collect from investors in their funds.
The CalPERS investment also gives the pension fund access to co-invest with Silver Lake in certain investments. CalPERS has committed to make additional investments in Silver Lake’s funds and will have a seat on the firm’s management advisory board.
At about $2.75 billion, Silver Lake’s valuation appears rich compared with some of its competitors, though it is hard to make a direct comparison because it is private and does not disclose its financial details.
While Blackstone is valued at $19.5 billion in the stock market, that firm manages almost $90 billion, while Silver Lake manages just $16 billion. Based on assets under management, Silver Lake would be valued at about 5.8 times its assets, while Blackstone is valued at 4.6 times.
The firm is raising two new funds, Silver Lake Sumeru, the firm’s middle-market investing strategy, and Silver Lake Financial, the firm’s credit investment group, according to people briefed on them.