HSBC's Asian PE team to spin out

The division's management team, led by George Raffini, is poised to purchase just over 80% of the business.

Global banking giant HSBC has agreed to sell an 80.1 percent stake of its Asian private equity business HSBC Private Equity Asia (HPEA) to the firm’s management team, while retaining the remaining share.

HSBC said in a statement it expected the transaction to be completed by the end of the year if approved by regulators and investors in the funds advised by HPEA. The unit is expected to have consolidated gross assets of approximately $18.8 million at completion.

Financial terms of the deal were not disclosed.

Headquartered in Hong Kong, HPEA manages six private equity and three venture capital funds. It closed HPEF VI, a pan-Asian private equity fund focused on growth capital investments, on $1.5 billion in December 2008. The fund surpassed its target of $1.25 billion at a time when some other established names in the Asian private equity market weren't hitting their fundraising targets.

Led by George Raffini, who joined at  the firm’s inception in 1989 and has headed the firm in his capacity as managing director since 1998, HPEA has managed approximately $3.5 billion in capital and invested in more than 140 companies throughout Asia.

In an interview with PEI Asia in August last year, Raffini said the parent group’s value-add as a leading financial institution was an important part of HPEA’s value proposition. The firm leverages the HSBC network for deal flow and for market intelligence across countries and industries, he said at the time.

In June, HSBC said it was considering selling five of its private equity fund management businesses to their respective management teams as part of a global initiative “to meet the requirements of a changing regulatory environment”.  This would be the first of those businesses to be spun out.

HSBC’s private equity businesses, which managed a combined $8.8 billion of assets as of June this year, are HPEA; HSBC Specialists Investments in the UK; HSBC Capital in the US; HSBC Capital Canada; and HSBC Private Equity Middle East. I

As an example of changing environment referred to, in July the US Congress passed sweeping financial reform legislation including the so-called “Volcker rule,” which limits banks’ proprietary trading activities with regard to hedge and private equity funds. The rule forces banks to hold no more than 3 percent of a private equity fund’s capital.