Florida SBA Takes Lexington Stake for $41 Million

(July 14, 2010) — The Florida State Board of Administration, which oversees a total of $138.4 billion, including the $112.2 billion Florida Retirement System, has purchased a nearly 10% stake in Lexington Partners Inc. with a $41.25 million investment on June 18.

“As far as private equity goes, we’re conservative – we’re behind the curve in terms of commitments to private equity, but it’s apparently serving us well,” SBA’s Dennis MacKee told ai5000.

Despite such transactions falling in number following the downturn of 2008, SBA’s investment mirrors similar actions by a number of limited partners, such as pensions and sovereign wealth funds, that purchased stakes in private equity firms’ management companies during the buyout boom. The deal highlights the SBA board’s first ownership stake in a private equity manager or any investment management company.

SBA has been working on the deal since 2008 and has been making investment commitments with New York-based Lexington since 1998. The board currently has $2.1 billion invested in private equity with Lexington, — consisting of $1.5 billion as a co-investor and $600 million in Lexington funds 4, 5, 6 and 7.

Lexington plans to use the sale proceeds for expansion, which includes opening a new office in Hong Kong. Evercore Partners, the board’s consultant on investing in general partnership management companies, assisted on the deal.

Separately, early last month, the Tallahassee-based pubic pension revealed aims to increase its exposure to alternative investments. For the first time, the Florida Retirement System (FRS) said it would move into hedge funds, reflecting the fund’s move toward a greater exposure to alternative investments. “We’re trying to find a way to maintain and improve our return while re-selecting the type of risk we’re taking,” SBA spokesperson MacKee told ai5000.