Secondaries syndicate backs BofAML Asian spin-out

The secondaries market continues to be bolstered by financial institutions divesting in-house private equity arms.

Bank of America Merrill Lynch Private Equity Asia, a four-year-old captive group that had invested on behalf of Merrill’s balance sheet, has spun out of its parent with the backing of a heavy hitting group of secondaries funds.

Paul Capital, HarbourVest Partners, LGT Capital Partners and Axiom Asia helped to establish the spin-out’s first fund, a $400 million vehicle seeded with the entire non-real estate private equity portfolio of Bank of America Merrill Lynch in Asia, which comprises more than 20 growth and buyout assets in China and India.

The newly independent firm, NewQuest Capital Partners, is led by managing partner Darren Massara.

“The partnership with Paul Capital, HarbourVest, LGT Capital Partners and Axiom Asia will allow our team to continue to harvest our existing portfolio on a seamless basis, as well as execute on our unique investment strategy for the Asian market,” Massara said in a statement.

That the team spun out and took its portfolio with them makes the deal a first-of-a-kind in Asia, Massara told PE Asia. He added that the fund also had remaining capital for new acquisitions and add-on investments, but declined to give specific figures as to existing portfolio size or dry powder.

NewQuest will go on to make direct secondary investments in Asia, with a bite size of up to $100 million on a deal-by-deal basis, Massara said.

Massara is joined in his endeavours at NewQuest Capital by partners Amit Gupta, who will focus on India; Bonnie Lo and Min Lin, who will focus on Greater China and the mainland respectively; and Ryutaro Aida who will focus on Japan. All were formerly from Bank of America Merrill Lynch’s Asia private equity team.

Last September, global bank HSBC agreed to sell an 80.1 percent stake of HSBC Private Equity Asia to the firm’s management team, which is headed by George Raffini. In June, the global banking giant had 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”.

Many other financial institutions, including Citi, Lloyds and Barclays, are selling their private equity holdings as they seek to reduce non-core activities.