Dublin-based corporate finance firm Key Capital has raised €500 million for a private equity fund on behalf of SVG Capital.

The SVG Diamond Fund II is made up of €175 million of equity from private and institutional investors, including some Irish insurance companies, and €325 million in rated bonds.

The investment gives institutional fund managers exposure to the private equity asset class, which they cannot invest in directly, by using a securitisation structure more typically associated with the fixed income market. The debt side of the fund was raised from large asset management firms in New York and London.

Key Capital managing director Conor Killeen said institutional fund managers could no longer ignore private equity, as they were missing out on vast tracts of corporate life and the often superior performance of private equity groups.

Mr Killeen said many of the innovative products designed to give institutional fund managers access to private equity were originating in Dublin. He added that there was room for substantially more activity in the market as a result of demand for the asset class from Irish institutional investors."There is a lot going on already under the surface," Mr Killeen said.

The leveraged fund is actively managed and the bonds will be listed on the Channel Islands stock exchange. The fund will focus mostly on buyouts, investing in large European buyout firms. It has agreements in place to acquire 14 funds, with a total value of €62 million.

It is estimated that the portfolio will give investors exposure to around 500 mature companies.

SVG Capital is a private equity investor and fund management business listed on the London Stock Exchange. It bought a 20 per cent stake in Key Capital last month.

In a separate development, Key Capital has entered into a joint venture with Deutsche Bank to offer private equity funds, derivatives, leveraged investments and real estate funds managed by specialist managers to Irish high net worth investors.

The company has hired Conor Walsh, a director at Bank of Ireland Private Banking, to run its part in the business and expects to launch the first products in a couple of months' time.

Key Capital was founded in 2001 by Killeen, Kyran McStay and Ken Mintern.