Baring Asia gets $300m fund commitment via HSBC private bank

HSBC established a feeder vehicle to accommodate commitments from investors in markets such as the US, Luxembourg, Switzerland, Hong Kong, and Singapore. It claims to have been the only global private bank with access to the vehicle.

Baring opened the data room for the fund in early 2018, revealing a target of $5.5 billion. A first close of $4.5 billion came last July and the hard cap is said to have been set at $6.5 billion. LPs that have disclosed their participation include Employees Retirement System of Texas, Teacher Retirement System of Texas, Los Angeles City Employees’ Retirement System, and Los Angeles Fire & Police Pensions.

The strategy is like that of the GP’s previous vehicle, which closed at $3.98 billion in early 2015. It pursues control-oriented buyouts of mid to large businesses with enterprise values of $500 million and above. Baring primarily focuses on China, Japan, Korea, India and Southeast Asia, but it has also acquired numerous companies that are headquartered outside of Asia and looking to tap growth in the region.

Recent activity includes an agreement to acquire 30% of India’s NIIT Technologies for INR26.3 billion ($379 million) – with the commitment set to rise to as much as INR49 billion should a tender offer go through – and a JPY102 billion ($905 million) privatization of Japan’s Pioneer Corporation. In addition, the GP listed Clarivate Analytics through a reverse merger in New York. Clarivate is a Fund VI portfolio company that was acquired from Thomson Reuters in conjunction with Onex Corporation in 2016.

According to Pennsylvania State Employees' Retirement System (PennSERS), Fund VI had delivered a multiple of 1.32x and an IRR of 17.6% as of June 2018. This compares to 1.44x and 11.5% for Fund V and 1.6x and 8.78% for Fund IV. A note published by the Rhode Island state treasury last year claimed that three of Baring’s four most recent funds were ranked by Cambridge Associates in the first or second quartile of Asia private equity funds, based on net IRR, at the end of 2017.

Henry Lee, global head of managed investment solutions with HSBC Private Banking, said in a statement that more clients are looking to alternatives as a means of portfolio diversification, given the volatility and high valuations in public markets. “For those sophisticated investors with a long-term investment horizon, private equity can play a valuable role. In our view, investing in Asian private equity is attractive due to continued economic momentum in the region,” he said.

HSBC makes about half a dozen funds available on its platform per year, spread out evenly over 12 months to avoid congestion. The minimum check size is $250,000 but most investors are putting in $2-5 million, a representative of the bank told AVCJ in 2017. Separately, industry sources say feeder vehicles need to be at least $150 million in size to justify a private bank’s distribution efforts. Charges vary, but clients typically pay an upfront arrangement fee and annual trailing fees.

While high net worth participation in large-cap funds is not unusual, private banks have played a significant role in some smaller fundraises in Asia. For example, a feeder vehicle established by J.P. Morgan is said to have accounted for half of the $950 million L Catterton Asia – then known as L Capital Asia – raised for its second fund in 2013.

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• Topics
• Fundraising
• Buyout
• GPs
• LPs
• Asia
• Baring Private Equity Asia
• HSBC
• HNWIs