Proposed Investment in Silver Lake Partners VI, L.P.

Memorandum to: State Investment Council
From: Corey Amon, Director
Subject: Proposed Investment in Silver Lake Partners VI, L.P.

The Division of Investment (the “Division”) is proposing an investment of up to $100 million in Silver Lake Partners VI, L.P. (the “Fund”). This memorandum is presented to the State Investment Council (the “Council”) pursuant to N.J.A.C. 17:16-69.9.

The Division is recommending this investment based on the following factors:

  • Strong investment track record through volatile market cycles. Silver Lake Partners (“Silver Lake” or the “Firm”) has consistently delivered top quartile returns even during economic downturns. The Firm has generated a 19.2% net IRR and a 1.8x net TVPI to date across five funds.
  • Technology domain expertise and global relationship network. The Firm has deep and extensive relationship networks and specialized knowledge investing in the technology sector. Silver Lake sources deals directly through industry relationships it has formed in the more than 20 years the Firm has been in operation.
  • Thematic approach with a focus on market leaders and growth. The Firm focuses on leading, franchise-quality companies with inherent competitive advantages. Investing in high-growth businesses, Silver Lake seeks mispriced companies with strong top-line growth rates.

A report of the Investment Policy Committee (“IPC”) summarizing the details of the proposed investment is attached.

Division Staff and its private equity consultant, Aksia TorreyCove Partners, undertook extensive due diligence on the proposed investment in accordance with the Division’s Alternative Investment Due Diligence Procedures.

As part of its due diligence process, staff determined that the Fund has engaged a third-party solicitor (“placement agent”) in the fundraising of the Fund but no placement agent was engaged or paid in connection with the Pension Fund’s potential investment.

Staff will work with representatives of the Division of Law and outside counsel to review and negotiate specific terms of the legal documents governing the investment. A preliminary Disclosure Report of Political Contributions has been obtained in accordance with the Council’s policy concerning political contributions (N.J.A.C. 17:16-4) and no political contributions have been disclosed. An updated Disclosure Report will be obtained at the time of closing.

Note that the investment is authorized pursuant to Articles 69 and 90 of the Council’s regulations. Silver Lake Partners VI, L.P. is considered a private equity buyout investment, as defined under N.J.A.C. 17:16-90.1. Pursuant to N.J.A.C. 17:16-90.4(a)1, the aggregate market value of private equity investments shall not exceed 12% of the combined assets of all of the Pension and Annuity Funds. As of May 21, 2020 the aggregate market value of private equity investments is 11.67% of the combined assets of all the Pension and Annuity Funds excluding the Police and Fire Mortgage assets.

A formal written due diligence report for the proposed investment was sent to each member of the IPC prior to its meeting on May 13, 2020. In addition to this formal written due diligence report, all other information obtained by the Division on the investment was made available to the IPC.

We look forward to discussing the proposed investment at the Council’s May 27, 2020 meeting.

Source: State of New Jersey State Investment Council