NEW YORK – JPMorgan Chase & Co. (JPM) said on Tuesday it will spin off its $13 billion private equity fund, but will keep a similar unit recently acquired in its merger with Bank One Corp.
The spin-off, which comes amid a trend of bank spin-offs of private equity funds, is expected to take some volatility out of the bank's earnings while decreasing competition between the bank and large customers when making investments.
The No. 2 U.S. bank said its private equity unit, JPMorgan Partners LLC (JPMP), will become an independent partnership when it completes the investment of its current $6.5 billion Global Fund. JPMP will manage the Global Fund and existing JPMorgan Partners investments.
As an independent entity, the partners in the fund will have ownership stakes, as is typical in most private equity firms.
The bank will invest 24.9 percent, or up to $1 billion, in the new fund that the firm plans to raise as a successor to the current Global Fund. Because its stake will be less than 25 percent, it will be classified as a passive partner.
JPMorgan Partners Asia will continue to raise money for a second fund and will be associated with the new independent private equity firm.
Once fund-raising for the Global Fund is complete, One Equity Partners will become the sole private equity investment vehicle for JPMorgan Chase & Co.
JPMorgan took over One Equity Partners after it completed its $58 billion purchase of Bank One in July 2004.
JPMP had approximately $13 billion in capital under management as of Dec. 31. JPMP has invested more than $15 billion in consumer, media, energy, industrial, financial services and health-care companies.