In order to comply with regulations,
) intends to divest Citi Venture Capital International (CVCI) - a
private equity fund - to investment firm Rohatyn Group. The deal
will expectedly close in the fourth quarter of this year, subject
to customary closing conditions. However, the financial details
have not been disclosed yet.
CVCI is a division of Citigroup's alternative asset management
unit, Citi Capital Advisors. CVCI, which was formed in 2011,
operates entirely in emerging markets such as Singapore, Hong
Kong, Mumbai, New Delhi, London, New York and Santiago.
Presently, CVCI administers five funds as well as other
investments, and has roughly $4.3 billion in equity investments
and committed capital.
On completion of the deal with Rohatyn, Citi Capital Advisors
will have only one fund left to offload. This will be the North
American private equity fund Metalmark Capital, which it is
already trying to sell to its management.
New York-based Rohatyn Group is a major emerging markets asset
management firm, which operates around the globe. Upon
completion, the deal will further diversify Royalty's market
operations. Additionally, it will provide Rohatyn a global
footprint and nearly $7 billion in total assets under management.
Of late, the private equity business has become less lucrative
for banks due to stringent regulations that restrict proprietary
trading and investment activities. As per the Volcker Rule (a
provision of the 2010 Dodd-Frank law), a company is prohibited
from investing more than 3% of the private equity funds raised or
3% of the lender's Tier 1 capital. This provision is expected to
adversely affect the future of the bank-owned private-equity
units and will make them less attractive.
Over the past few years, several banks have been spinning off
their private equity operations to conform to the requirements of
the Volcker Rule. Recently, Credit Suisse Group AG (CS) agreed to
sell its private equity business to
The Blackstone Group L.P.
). The deal is expected to close at the end of third-quarter
Bank of America Corporation
) announced the divesture of BAML Capital Partners, clearly
reflecting the impact of the Volcker Rule.
JPMorgan Chase & Co.
) is also set to divest its private equity arm, One Equity
Partners and establish it as an independent firm.
Citigroup currently carries a Zacks Rank #3 (Hold).
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