HSBC Private Equity,the European private equity unit of HSBC Group, has secured £490m for the first closing of its second fund, placing it well on track to meet its £600m target set for the end of March.
HSBC Group is matching investor commitments “pound for pound,” which means the Private Equity European Fund could total £1.2bn, said Vincent O’Brien, a director at HSBC Private Equity.
Since the vehicle was launched at the end of July last year, nine of the ten institutional investors in the firm's first fund have reinvested, with the 10th expected to come in shortly. On top of that HSBC Private Equity have added a number of new institutional investors. These investors include a mix of European pension funds and insurance companies plus one US pension, said O’Brien. It also has a £50m commitment from high net worth clients of HSBC Republic, a private bank HSBC bought two years ago.
“Interest in private equity from high net individuals is growing, and with this latest fund we have given this type of investor the chance to get involved,” adding the group was in advance talks with a number of additional investors looking to get on board by the deadline.
However to gain entry investors need to invest a minimum of £25m over five years, because “we’d rather have a few investors with large commitments than a lot with small amounts,” he said.
The focus of the fund will be middle-market leveraged buyouts in the manufacturing and service industry sectors, split 50/50 across Europe, but primarily in the UK, France and Germany. The company will look to buy controlling stakes in companies with enterprise values of £50m to £500m.
“We believe this is a successful area because it’s where the volume is, plus we have a good corporate banking network across Europe, which has been a good source for private equity deals in the past.”
The group’s first fund HSBC Private Equity Partnership Scheme closed at £1.1bn. It has now fully committed with 35 realisations from its 55 investments. Composite IRR for the fund was more than 30 per cent.