Lewis Fallout: Public Fund-Backed PE Firm Faces Stress Over HFT Investment

nyc_realestate_sovereignwealthfundSilicon Valley-based Silver Lake Partners, which touts public pensions and sovereign wealth funds as limited partners through its various funds, invested in New York-based Virtu Financial. Two investor examples are the Kuwait Investment Authority and the Alaska Permanent Fund Corporation. Virtu Financial has postponed its planned US$ 100 million initial public offering indefinitely, due to fallout from Michael Lewis’ Flash Boys: Cracking the Money Code. The 53-year-old writer sold 130,000 copies of Flash Boys in the United States after the first week of publication. In late March, the New York Times reported Virtu Financial made money in equity markets in 1277 days out of 1278 days. Silver Lake-backed Virtu Financial has received a letter of inquiry from New York Attorney General Eric Schneiderman.

Silver Lake has invested in a slew of financial technology firms that aim to bring “efficiency” to markets.

The California Public Employees’ Retirement System (CalPERS) purchased a 9.9% interest in Silver Lake Partners back in early 2008 for a purported estimate of US$ 275 million. The technology-focused private equity firm has invested in deals involving Dell, Seagate and Skype. Silver Lake has invested in a slew of financial technology firms that aim to bring “efficiency” to markets.

Silver Lake allocated capital to Virtu back in 2011. In a May 2011 Virtu press release, the chairman and CEO of Virtu, Vincent Viola, stated, “Virtu’s mission is twofold. First, to provide market participants and regulators with access to its proprietary market data distribution, market surveillance, risk management, clearing and price discovery tools. Second, to provide retail and institutional investors with reliable, real time competitive prices so that they can continue to benefit from further compression of bid/ask spreads and reduced trading commissions.”

Goldman Sachs, Sandler O’Neill + Partners, L.P. and JP Morgan were the lead underwriters of the postponed Virtu IPO.

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