SVG Capital advisory arm SVG Advisers has raised €400 million ($493 million) through an innovative collateralised fund obligation (CFO) vehicle known as SVG Diamond.
In a statement, SVG claimed the fund was one of only a few to have successfully raised capital from the international fixed income markets for investment in private equity. SVG Diamond comprised €260 million of investment grade bonds and preferred equity shares representing commitments of €140 million at closing.
The investment grade bonds allow international fixed income investors exposure to private equity at various levels of credit risk. SVG Diamond issued four tranches of bonds denominated in both euros and US dollars, which have been rated by three rating agencies in the AAA, AA, A and BBB categories.
The statement said SVG Diamond would initially purchase a secondary portfolio of interests in approximately 20 private equity funds and will make commitments to around 40 primary private equity funds, diversified by vintage year, manager and geography.
The CFO will predominantly focus on buyouts in Western Europe and the US and will have an over-commitment facility of 133 percent (allowing a target investment capacity of €533 million) and a re-investment period of seven years.
“This innovative structure allows private equity fund of funds to tap the fixed income market on an extensive basis, thus providing an attractive cost of capital,” claimed Andrew Williams, chief executive of SVG Advisers.
SVG Diamond was arranged by Nomura International, while Key Capital acted as project manager and corporate finance adviser.
Founded in 1996, SVG Capital (formerly Schroder Ventures International Investment Trust) is a private equity fund of funds and fund advisory business listed on the London Stock Exchange. At 30 June 2004, it had holdings valued at over £621 million and uncalled commitments of £529 million to 23 private equity funds managed or advised by Permira or Schroder Ventures.
SVG Advisers advises investment vehicles that invest in private equity or public equity using private equity techniques. It has combined third party funds under management and commitments of approximately €1.4 billion.