Conversus taps liquidity provider

Conversus Capital, the Oak Hill Investment Management- and Bank of America-backed publicly listed fund of funds, has again tapped investment bank ABN AMBRO to act as a liquidity provider as Euronext-listed private equity funds struggle.

A year after making its $1.8 billion public debut on the Amsterdam stock exchange, the Channel Islands-incorporated firm has entered into an agreement whereby the Dutch branch of ABN will issue a continuous quote in the order book for Conversus shares, equivalent to a standing order to purchase available common stock.

“With any public entity there’s going to be some successes and some failures,” Conversus chief financial officer Tim Smith told PEO. “This market is big and growing, allocations to private equity are growing…we think that this story will only get better with time.”

The arrangement is the second Conversus has made with ABN to increase its liquidity. In November, ABN’s London office entered a liquidity enhancement contract with Conversus to buy back shares of the fund on Conversus’ behalf.

At time of press, Conversus was trading at $23.40 (€14.80), down 6 percent from its issue price of $25. As of 30 June, its net asset value per share unit was $27.64, down 3.9 percent for the year.

Conversus is just one of several private equity-related vehicles to struggle on the Euronext exchange.

Lehman Brothers Private Equity Partners’ stock price has fallen to $7.70 after debuting at $10.25 last year. Fund of funds HarbourVest’s Euronext vehicle has encountered difficulty sustaining trading volume. Most famously, Carlyle Capital Corporation, a mortgage-backed securities investment fund affiliated with buyout giant The Carlyle Group, collapsed after a $1 billion public float.

Spun out from Bank of America Strategic Capital last year, Conversus earmarks 80 percent of its total capital towards new private equity fund interests and private equity funds purchased in the secondary market. The remaining 20 percent is targeted towards co-investment opportunities.

The firm is led by Bob Long, former head of Bank of America Strategic Capital. At the vehicle’s public debut last July, Bank of America purchased roughly $200 million in common stock as well as a sizable private share in Conversus holding company Conversus Asset Management.

Oak Hill purchased $25 million at the offering, and is required to purchase another $25 million in the future, according to Smith.

Major limited partners also hold significant swaths of Conversus stock. The California Public Employees Retirement System purchased $500 million in public equity, while the Harvard University endowment bought $250 million at the offering. Both CalPERS and Harvard’s stakes just came out of lockup last week, according to Smith.