* Former Deutsche traders team up with Riverstone group
* Venture to invest in energy, coal, metals, trade
* New investors come in commodities as banks reduce exposure
By Dmitry Zhdannikov
LONDON, May 21 Former top commodities traders
from Deutsche Bank are in talks with U.S. private
equity group Riverstone to set up a $0.5-1.0 billion venture
that will both invest and trade in commodities.
The venture, which will put money into assets ranging from
energy producers to pipelines and refineries, is a rare foray by
a private equity firm into commodities at a time when banks are
curbing exposure due to tighter regulations and stagnant prices.
Riverstone, an energy and power-focused private investment
firm with around $24 billion of capital raised across seven
investment funds, will hold a controlling stake in the venture,
TrailStone, to be launched later this year.
David Silbert, who led Deutsche's commodities trading team
from 2007 before leaving last year as the bank reduced exposure
to commodities, will also be investing in TrailStone together
with his partners, Silbert told Reuters.
"TrailStone will be an asset-backed commodities merchant. We
will buy refineries and production assets, create joint ventures
with people who have assets," Silbert said.
"There are loads of upstream producers who need capital. We
will be telling them - pay us back in production not cash."
Riverstone declined to comment on the investment.
Silbert had helped build Deutsche into one of the largest
commodities players in banking before the German lender reduced
exposure for reasons including tougher regulations on
Hedge funds have also recently reduced exposure to
commodities due to poor returns, giving a large market share to
unregulated Swiss trading houses.
"We will be different from a hedge fund. Our model won't be
very much different from trading companies, which have been
generally good at acquiring assets," said Silbert.
"But we will be fairly risk averse. There will be no
emphasis on proprietary trading," he added.
He said the company would invest in assets across all
continents and have offices in the United States, Britain and
"The venture will be energy-focused but precious and base
metals, iron ore and coal will be also big for us. We will be
focusing on investing in mid-sized companies with quality
assets," he said.
Once the venture is running, it could partner with other
private equity funds or offer them help in running assets or
Silbert's partners at TrailStone will be Troy Martin,
previously chief operating officer of Deutsche's commodities
trading, Bill Gebhardt, who as he did at Deutsche will oversee
European power and gas, John Redpath, who will look after oil
and agriculture, and Raymond Key, who will oversee metals.
Silbert previously worked at Merrill Lynch and Koch Trading.
Riverstone has offices in New York, London and Houston and has
invested around $21.8 billion to 98 projects in North America,
Latin America, Europe, Africa and Asia.