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Bank of America to set up $1bn private equity fund

Bank of America has jumped on the private equity bandwagon, filing forms with the SEC for a $1bn private equity fund.

Charlotte, North Carolina-based Bank of America, the second-largest and second-oldest bank in the United States, is setting up a private equity fund to seek investors willing to invest $500,000 (€389,500) or more, up to a total of $1 billion (€779 million), according to an SEC form filed on August 9.

The Boston-based fund will be known as BA Private Equity Direct, and was incorporated on May 6, according to the filing.

Investment banks such as Goldman Sachs and Merrill Lynch have long been reaping profits from the private equity sector. The numbers are attractive: the average annual return from all private equity funds in the first quarter of 2006 was 22.8 percent, compared with 9.7 percent for the S&P 500 Index, according to Thomson Financial and the National Venture Capital Association.

Bank of America’s larger rival, New York-based Citigroup, is reportedly in the process of raising a $3.5 billion (€2.7 billion) private equity buyout fund, an unnamed well-placed source told Bloomberg News earlier this month.