HPEA completes spin-out, re-emerges as Headland

The management buyout of HSBC Private Equity (Asia) completed Tuesday. Some 16 professionals have joined new firm Headland Capital Partners.

The spin-out of HSBC Private Equity (Asia) from HSBC Bank completed Tuesday, the firm said in a statement. The new entity, which manages committed capital of $2.4 billion, has been named Headland Capital Partners.

The management-led buyout of HPEA was first announced in September, after HSBC  stated in June that it was considering selling five of its private equity fund management businesses as part of a global initiative “to meet the requirements of a changing regulatory environment”. 

Headland, which is the first of the five businesses to be sold, is 80.1 percent owned by its management team, led by George Raffini. HSBC has retained the remaining 19.9 percent stake and is also still one of the largest investors in Headland’s funds, the statement noted.

“Initially, 16 colleagues are joining me as owners of our business. The team is truly excited about this next phase in our firm’s development, while continuing the relationship with HSBC,” said Raffini in a statement.

Hong Kong-headquartered Headland is currently working from its fifth and sixth private equity funds. Most recently, it raised the $1.34 billion Headland Private Equity Fund 6 (formerly HPEF VI), which closed in December 2008. It has also raised three venture capital funds, with the most recent of these being Headland Ventures Fund 3 Limited, which closed on $230 million in 2009.

It is expected that more banks will follow in HSBC’s footsteps in divesting their private equity operations and investments over the next couple of years as regulatory pressures increase in Europe and the US. One example is so-called Basel III, scheduled for full implementation by the end of 2012, which will force banks to increase overall liquidity in their balance sheets and back illiquid investments up with a high ratio of capital reserves.  

In a recent conversation with sister publication PEI Asia, Hiro Mizuno, partner and Asia head at secondaries specialist Coller Capital, said most banks the firm has spoken to over the past 18 months are leaning towards exiting private equity completely.

“The banks’ preference is to sell their entire private equity portfolio. Basel II is so burdensome from the banks’ perspective – they almost have to put aside 100 percent of equivalent capital for the alternatives exposure, which is just too expensive for them,” he stated.