Nomura International in London is working toward bringing private equity exposure to a broad range of fixed-income investors. The firm is planning to launch in the first half of next year a collateralized fund obligation that may include a portion for retail investors.
Private equity is a rare asset class for bond investors and Nomura is among the first firms to make it investable by structuring collateralized fund obligations backed by private equity funds of funds, said James Witter, head of private equity debt capital markets in London.
"The next step is to give the retail investor exposure to top-flight buy-out funds, by offering a principal protected product," Witter said, noting Nomura recently closed the first CFO of private equity funds of funds. Marketing for the next CFO will focus on attracting Japanese investors, while the first deal was sold to European and U.S. buyers.
SVG Diamond, the first Nomura deal and one that closed in September, differs from previous CFOs such as Pine Street and Silver Leaf because SVG Diamond is backed by an actively managed pool. Specifically, SVG Diamond will initially invest in a portfolio of about 20 private equity funds and make primary commitments to about 25 private equity funds over the next seven years, which Witter said will create a dynamic portfolio with 400-500 underlying company investments.