SVG Advisers raise E400m through collateralised fund obligation of private equity funds

12 October 2004

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SVG Advisers has announced that SVG Diamond has raised E400m through an innovative collateralised fund obligation (CFO) of private equity funds, comprising E260m of investment grade bonds and preferred equity shares representing commitments of E140m at closing. The investment grade bonds allow international fixed income investors exposure to the private equity asset class at various levels of credit risk. SVG Diamond is the first CFO of private equity funds incorporating drawable equity, reinvestment and over-commitment strategies. SVG Diamond issued four tranches of bonds, denominated in both euros and dollars, which have been rated by the three rating agencies in the AAA, AA, A and BBB categories. These ratings have been achieved without the benefit of a third-party insurance wrap. Fixed income investors were approached via a targeted global marketing program. A broad distribution by geography and investor type has been achieved, with a wide variety of fixed income investors keen to gain exposure to the private equity asset class for the first time. SVG Diamond will initially purchase a secondary portfolio of interests in approximately 20 private equity funds and will make commitments to approximately 40 primary private equity funds, diversified by vintage year, manager and geography. The CFO will predominantly be focused on buyouts in Western Europe and the US and will have an over-commitment facility of 133% (allowing a target investment capacity of E533m) and a reinvestment period of seven years. The arranger of SVG Diamond was Nomura International Plc.