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HSBC fund steps into private equity

HSBC’s OpenFunds global return fund has diversified into private equity by taking a small holding in Pantheon International Participations, an investment trust that also takes a fund of funds’ approach.

Pantheon is managed by the private equity arm of multi-manager specialist Russell Investment Group. It invests globally in private equity funds and occasionally makes direct investments in private equity companies.

The majority of Pantheon’s portfolio is invested in new private equity funds but a third is in more mature funds through shares on the secondary market. Holdings are bought at a discount and sold at a premium.

HSBC head of multi-manager James Hughes says: “Our global return fund has a natural allocation to private equity as a diversifier. Private equity is uncorrelated with most markets, including equities, and offers an enhanced return over the longer term. But it is very difficult to value in most fund holdings.

“We were nervous of the wall of money going into private equity over the last few years. A huge amount has flown towards it during the last 12-18 months. We like Pantheon because it invests in the secondary market, which does not have the same sort of issues.”

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