HarbourVest mulls FoF float on Euronext(3)

HarbourVest Partners may list on the Euronext a fund of funds vehicle that would invest in the US firm's existing funds.

HarbourVest Partners may join the likes of Lehman Brothers, Bank of America and others in listing a fund of funds on Amsterdam's Euronext exchange. The US firm said in a statement it is considering listing a closed-ended fund that would be invested “across a diversified portfolio of existing HarbourVest funds”.

HarbourVest would not be the first US firm to list a fund of funds

This is an industry where skill is absolutely essential and who is generating alpha is not difficult to identify. The next question is how you gain access.

Nicola Horlick

in Europe. In July, Bank of America Capital and Oak Hill Investment Management floated a fund of funds called Conversus Capital on the Euronext. The firms offered $400 million in shares that gave investors access to a portfolio of Bank of America funds. Lehman Brothers also floated a $400 million fund of funds on the Euronext in June.

There are signs that investor appetite for publicy traded fund of funds is increasing. Bramdean Asset Management’s Nicola Horlick, who recently raised £131 million for a listed fund of funds that invests in private equity and hedge funds, said opening up access to private equity funds was a key step in the industry’s development.

Horlick predicted a booming market of high net worth retail investors looking to diversify into private equity, but who would struggle to access the best performing managers.

“This is an industry where skill is absolutely essential and who is generating alpha is not difficult to identify,” she said. “The next question is how you gain access.”

HarbourVest was originally the venture arm of insurance and financial services firm John Hancock, but spun out in 1997. It is primarily a fund of funds manager, but also makes direct investments and invests in secondaries.

HarbourVest has to date committed $17.6 billion (€12 billion) to private equity funds on a primary basis and completed $3.9 billion of secondary partnership interests. It has also invested $3.1 billion directly in operating companies.

HarbourVest's most recent domestic fund of funds, which closed on $4.4 billion in 2004, generated an internal rate of return of 6.34 percent in 2006, according to disclosures from the Colorado Public Employees' Retirement Association.

The firm's most recent international fund closed in 2002, and is composed of a $2.4 billion fund of funds and a $375 pool for direct investments. The fund of funds component generated an IRR of 22.1 percent in 2006, while the direct investment pool generated an IRR of 19.5 percent, according to disclosures from the Washington State Investment Board.