Deals

HSBC taps secondaries market for $1.4bn strip sale

The transaction comes as the bank combines its private fund investment teams under the banner of HSBC Alternatives, which has $26.4bn in private market funds and mandates.

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HSBC, one of the world’s largest banks by assets, is approaching the finish line on one of the largest secondaries deal in Europe over the past 12 months.

The investment banking arm of the $2.9 trillion institution sold $1 billion of private equity exposure from its principal investments portfolio into a closed-ended vehicle, according to three people familiar with the matter.

The fund, Private Equity Opportunities, held an interim close on $1.34 billion in December, with a final close planned for March, according to one of the sources. This includes primary capital for new investments. The fund’s target is $1.4 billion.

It will be the first secondaries fund directly managed by the bank.

The transaction was underwritten by a secondaries buyer with around one-third syndicated to HSBC clients, Secondaries Investor understands. Evercore advised on the process.

The identity of the buyer and the pricing are undisclosed.

Among the funds in the newly seeded portfolio are EQT Mid Market Europe, Montagu V, Charterhouse X, KKR Europe IV and KKR Americas XII, all 2015-vintage or later, according to public filings. The portfolio is made up entirely of private equity fund positions, Secondaries Investor understands.

In February 2020, HSBC’s Group chief financial officer Ewen Stevenson said the bank would aim to reduce its gross risk-weighted assets by $100 billion, targeting areas of the bank that are “generating low revenues to risk-weighted assets, with very high cost/income ratios”.

Last year HSBC brought all of its private market fund investments teams, including the principal investments unit, under the umbrella of HSBC Alternatives, part of the global asset management division. The combined investment team is led by Jonathan Marlow, previously global head of the Principal Investments unit.

HSBC Alternatives had $26.4 billion in private market funds and mandates as of 30 September.

Banks accounted for 5 percent of secondaries sales by volume last year, according to research by intermediary Setter Capital.

HSBC and Evercore declined to comment.

Updated to reflect new information about leadership of combined entity