bloggingbuyouts

Harvard is an easy target for the woes of our economy. Its business school produced George W. Bush, the fellow who's presided over the current economic catastrophe, and Rick Wagoner, the CEO of the largest automobile maker who's led its stock down 95% in the last eight years and now wants $25 billion worth of taxpayer money to keep the millions rolling into his bank account. But Harvard had these folks for just two years, so it's tough to blame the school for the current predicament.

However, with $36.9 billion in assets (as of June 30), Harvard also has the largest endowment of any university. And thanks to its big exposure to very illiquid interests in venture capital (VC) and private equity (PE) firms, Harvard leads a growing list of limited partners (LPs) which are selling stocks and those very illiquid interests in order to come up with the cash needed to fulfill their capital calls to these partnerships.

This requires some explaining. VC firms raise money from limited partners such as wealthy individuals, foundations, pension funds, and endowments. But the LPs don't write checks up front -- instead they hold onto their cash and must write a check when the VC calls and asks for the money when the VC is on the verge of making an investment. The problem for many LPs like Harvard is that much of their stock portfolio is locked up in hedge funds and these illiquid VC and PE interests.

With the deal market drying up, private equity firms need to find unique niches. One player that has been quite successful at this is Silver Lake Partners, which focuses primarily on tech deals. Some of its transactions include Flextronics, Avaya, Sabre Holdings and SunGard Data.

Silver Lake is now expanding its franchise. The firm recently hired Charles Giancarlo, the former Chief Development Officer at Cisco (NASDAQ: CSCO). Keep in mind that he was apparently a candidate for the CEO spot.

Then today, Silver Lake announced big news -- the firm has entered a "long-term strategic partnership" with the California Public Employees' Retirement System (CalPERS). The transaction calls for a 9.9% stake in Silver Lake and there will likely be more investments in future funds.

No doubt, we will see other private equity firms move into the tech space. However, this is far from easy -- especially since Silver Lake is continuing to improve its platform.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Earlier this year, private equity firm Fortress Investment Group (NYSE: FIG) had an IPO. Blackstone is also preparing its own offering and even got China to invest in its firm.

More and more, private equity firms are taking money off the table. The latest? It's Ares Management. The firm sold a minority interest for $375 million this week.

Who was the buyer? Well, Ares didn't disclose that. But, according to a press release, the buyer was a "long-standing client."

And Ares has some biggie clients. Examples include the Canada Pension Plan Investment Board and California Public Employees' Retirement System (CalPERS).

Based in Los Angeles, Ares has about $13 billion under management and has been in operation since 1997. The firm invests in a variety of areas, such as high-yield bonds, mezzanine debt, and bank loans.

Like other private equity firms, Ares has been growing at a staggering rate over the past few years. So, why not take some money?

Tom Taulli is the author of various books, including The Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.