Banks have run captive private equity funds using their own money for years, but in the face of the credit crunch more are making the decision to begin tapping outside investors in their fundraising efforts. Investment banks Daiwa Securities Group Inc. and Merrill Lynch & Co. each have plans to raise multibillion-dollar vehicles, but plan to use their management skills and other investors money.
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Daiwa Securities, Japan's second-largest broker, is considering a
$4.5 billion private equity fund
that would be open to outside investors, according to Reuters. The firm
already has its own buyout fund -- Daiwa Securities SMBC Principal
Investments -- that already invests the bank's capital in LBO deals.
Monday, Dow Jones'
Financial News reported
that Merrill Lynch's private equity arm plans to use "external
investors for half of its latest $6 billion fundraising rather than
relying on its owner's balance sheet as in the past." Merrill is reportedly hoping that an Asian-based investors will take
stakes in the fund with Korea Investment Corp., Temasek Holdings and
Japan's Mizuho Bank the likely candidates.
The moves by the two banks bring both closer to the model employed by
rival Goldman, Sachs & Co., which has long welcomed outside investors
into its private equity unit's investment funds.
- George White
See Reuters story
See Dow Jones story
