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Silver Lake funds sharply profitable, even in high-multiple market: LP report

  • Silver Lake targeting $12.5 bln for Fund V
  • Strong returns despite willingness to pay higher multiples: adviser
  • Idaho approves first commitment to Silver Lake

Silver Lake funds delivered $23.2 billion of profits through Sept. 30, 2016, an investment presentation obtained by Buyouts via public-records request shows. The total includes realized and unrealized investments across the firm’s flagship funds since inception.

The profitability of Silver Lake’s funds stands in contrast to its willingness to pay higher multiples for high-growth companies, according to a Hamilton Lane report included in the records request. The firm’s flagship funds netted an aggregate internal rate of return of 18.7 percent and 1.7x multiple through June 30.

Silver Lake IV, a $10.3 billion 2013 vintage fund, was netting a 29.8 percent IRR as of the same date.

“Silver Lake has been able to develop a strong reputation of investing in the technology sector through its four previous funds that spanned across multiple market cycles,” the Hamilton Lane report said. “The general partner’s success within the technology industry has driven direct deal flow as potential portfolio companies recognize Silver Lake as a value additive partner.”

Silver Lake’s portfolio, which includes the largest tech buyout of all time in Dell Technologies, generated more than $34 billion of profits in aggregate, according to the firm’s presentation. R&D across the portfolio surpassed $11 billion annually.

The firm is marketing its fifth flagship fund with a $12.5 billion target, though sources have told Buyouts that Fund V could raise as much as $15 billion. Fund V’s portfolio will likely include 15 to 20 portfolio companies with equity investments ranging $200 million to $1 billion.

The Hamilton Lane report and Silver Lake presentation were obtained from Public Employee Retirement System of Idaho.

Idaho’s board approved a $50 million commitment to Silver Lake Partners V at its Feb. 14 meeting, its first commitment with the firm, spokesman Kelly Cross told Buyouts in an email.

Silver Lake declined to comment.

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Jim Davidson, co-founder and chairman of Silver Lake, speaks at a panel discussion, “Private Equity: Where Risk Meets Opportunity,” at the 2009 Milken Institute Global Conference in Beverly Hills, California, on April 28, 2009. Photo courtesy Reuters/Fred Prouser