By Tanya Agrawal and Peter Rudegeair
June 14 JPMorgan Chase & Co said on
Friday its private equity unit, One Equity Partners, will become
independent, as the largest U.S. bank increases its focus on
One Equity Partners, which manages $4.5 billion of
investments, will raise its next investment fund externally
rather than from JPMorgan, becoming similar to stand-alone
private equity firms that pool funds from a variety of
One Equity Partners is not core to JPMorgan's business and
is being separated as the bank looks to simplify its operating
structure, according to a source close to the bank.
Private equity is a small part of JPMorgan's business. In
the first quarter, the unit posted a loss of $182 million,
compared with a profit of $134 million a year earlier.
One Equity Partners will continue to manage existing
portfolio companies for the bank, including the travel
technology firm Travelport and the healthcare firms
M*Modal and Wright Medical Group.
The private equity business has become less appealing in
general to banks because of the 2010 Dodd-Frank financial reform
law, which includes limits on banks' investing their own money
in such funds. The Volcker rule, named after former Federal
Reserve Chairman Paul Volcker, is expected to prevent banks from
contributing more than 3 percent of any new private equity funds
However, the Volcker rule, which is still being finalized,
would likely not apply to One Equity Partners. Since the unit
was funded entirely by JPMorgan, with no client money, it likely
would have been regulated by merchant banking laws instead.
"It would seem that if they wanted to continue this activity
they could likely do so, even if it needed a little
restructuring," said Joseph Vitale, a financial services partner
at law firm Schulte Roth & Zabel.
In its annual filing, JPMorgan said it had ceased some
proprietary trading activities during 2010 that would be
prohibited under the Volcker rule and has since exited
substantially all such activities.
Founded in 2001, One Equity has invested about $9 billion to
buy more than 60 companies in sectors including chemicals,
healthcare, technology, travel and manufacturing. It typically
invests between $50 million and $500 million in a single deal.
Dick Cashin, One Equity's managing partner, was previously
president of Citigroup Venture Capital.
JPMorgan shares were down 1.4 percent at $53.41 in midday
trading on the New York Stock Exchange.