Baring Asset Management is launching a private-equity fund aimed at charity investors.
Private equity involves investing in companies that are not quoted on the stock exchange, and can produce higher returns than traditional asset classes such as equities and bonds.
Baring has joined with investment manager Coller Capital to launch the Baring-Coller Secondaries Fund. The fund will buy "primary
private-equity funds that are selling because they are changing their asset allocation or have cash flow problems. The fund will focus on European and US assets.
The closing date for investment is mid-September.
Private equity is usually out of reach for most charity investors because of the large sums required of investors, but the Baring-Coller fund has been tailored to allow charities to invest. "There is a minimum investment of $10 million in private equity funds, but this 'feeder fund' has a minimum investment of $100,000 (£60,000),
said Melanie Wotherspoon, Baring's senior product specialist.
The fund also differs from mainstream private-equity funds in that there will be a maximum of two "draw downs
or calls for investment. The first will be 50 per cent of the minimum investment and a second may not be required, although Baring cannot guarantee this. Normally with private equity the fund manager calls for capital as and when is necessary.
According to Baring, a secondary fund is more secure than a primary investment because the fund has been invested in for a number of years and its realisation potential has been established.
But David Bailey, vice-president of charities at Deutsche Asset Management, warned that private equity was the most risky of the alternative asset classes being considered in the light of poor performance of equities and bonds.