The business of private equity firms taking minority stakes in alternative investment firms is only a few years old but if one recent deal is any guide, the strategy is already evolving. The opportunity set is expected to expand further as more firms sell minority interests in their general partnerships to finance growth.
One example of the evolution is the May 27 transaction concerning alternative investment firm Clearlake Capital Group LP, which sold a more-than 20% passive stake to three firms — Neuberger Berman's Dyal Capital Partners, Goldman Sachs Group's Petershill Group and secondary alternative investments firm Landmark Partners — to expand the firm's lineup of investment strategies. This is the first club deal in a private equity firm in the sector.
Alternative investment firms Apollo Global Management and Ares Management provide "blueprints" for the type of growth Clearlake Capital executives have in mind, said Jose E. Feliciano, Clearlake's co-founder and managing partner in an interview.
"The attraction of raising permanent capital is to fill out the spectrum" of investment strategies the firm would like to offer, he said. The next step for Clearlake could be a senior performing credit fund, he said.
The firm already offers a buyout fund and a separate, opportunity fund that makes minority investments in companies.
The capital infusion also would allow the general partnership to increase its commitment to future funds, Mr. Feliciano said. However, Clearlake executives don't have a target commitment.
"Traditionally, we have invested about 2%" of the total fund commitment, Mr. Feliciano said. "We would like to do better than that, if we can."