BofA, Oak Hill in complex $1.9bn Euronext venture(3)

Bank of America, Oak Hill, along with CalPERS and Harvard have created a unique, megafund-sized pool of permanent capital to be traded on the Euronext. The vehicle, Conversus Capital, is structured like a collateralised loan obligation with private equity fund interests as the underlying assets.

Bank of America Capital and Oak Hill Investment Management today unveiled a new vehicle called Conversus Capital that will trade as a permanent private equity pool of capital on the Amsterdam Euronext exchange.

Conversus Capital has raised $1.775 billion (€1.3 billion) through the sale of restricted depositary units (RDUs) in a Guernsey limited partnership. The structure is similar to that of a vehicle that raised $5 billion for Kohlberg Kravis Roberts last year.

Approximately 16 million units, valued at $400 million, will be offered on the Euronext, according to a press release. An additional $225 million will be retained by Bank of America and Oak Hill Investment Management, a fund of funds division of Stamford, Connecticut-based Oak Hill Capital Partners, a private equity firm that is affiliated with the Robert M. Bass family office of Texas. Oak Hill Investment Management, based in Sacramento, California, is led by Richard Hayes, the former head of the private equity programme of the California Public Employees’ Retirement System.

Fully $750 million of units in the vehicle will be sold to CalPERS and the Harvard Management Company, the university’s endowment. A further $400 million will be sold to unidentified investors.

A statement notes that Conversus will use the proceeds to purchase from Bank of America a portfolio of “seasoned private equity fund interests” for approximately $1.925 billion. The portfolio will be structured as a “collateralised fund obligation” programme, a structured vehicle widely used in the debt markets but accomplished only several times in private equity. Distributions from this “CFO” vehicle will be “reinvested in private equity fund investments and direct private equity investments”, according to the statement.

The statement was headed with the words: “Not for release, publication or distribution outside of the Netherlands.”

The vehicle will be managed by a joint venture management company created by Bank of America and Oak Hill called Conversus Asset Management.

Many banks and large financial institutions have sought to unload all or portions of their balance sheet private equity fund portfolios. Some, such as AIG, have done so through structured vehicles, although the majority of transactions of this nature have been completed through the private equity secondaries market.