TPG mulls sale to pensions

US private equity firm TPG is exploring the possible sale of a minority stake in the firm to major state pension funds.

Pension fund giants could be offered a small stake in TPG, one of many private equity firms currently considering ways of unlocking the franchise values of management companies, as well as of creating pools of permanent capital.

A Tuesday report in The Wall Street Journal said TPG is considering selling a 20 percent stake to its pension fund clients, but a source told PEO the possibility is at a very early, exploratory stage and – should anything come to fruition – TPG would likely sell a “single-digit” stake in line with industry precedents. In years past, several other private equity firms, including The Carlyle Group and Fortress Investment Group, have sold minority stakes in their firms.

TPG’s own venture arm, TPG Ventures, sold a $60 million equity stake in 2001 to the California Public Employees’ Retirement System, one of TPG’s largest pension fund investors along with the California State Teachers’ Retirement System and Oregon’s Public Employees Retirement Fund.

Apollo Management is also reportedly considering a private placement, which could preface a public offering similar to Fortress’ float or The Blackstone Group’s planned IPO.

At the Milken Institute’s 10th annual Global Conference in Los Angeles last week, Apollo founder Leon Black and Carlyle co-founder David Rubenstein said virtually all major buyout firms are exploring alternative means of extracting value from their operations and weighing the pros and cons of public offerings.

“When you go public, clients don’t feel you lost their money but that you stole their money,” Black said. “Who needs that?”

Also participating on the Milken panel was Texas Pacific Group founder David Bonderman, who reportedly said: “All of us are in private equity because we want to be private.”