BofA spinout to manage legacy assets, raise new funds

Two groups of Bank of America private equity professionals are spinning out: one will form an independent fund while the other will join asset manager Sterling Stamos.

A group of Bank of America private equity professionals is spinning out to form an independent firm that will manage about $1.4 billion of the bank's legacy private equity assets, and also look to raise third-party capital.

The new firm does not yet have a name, and the transaction has not closed, a Bank of America spokesperson told PEO.

We haven't seen the formal language under Basel III. [The proposed law] has requirements to hold capital against unfunded commitments. We have to evaluate that now and decide if that's an appropriate use of capital.

BofA Merrill Lynch spokesperson

“They were the group that was the legacy Bank of America private equity before we bought Merrill Lynch. They were called Banc of America Capital Investors,” the spokesperson said, adding that as of the first quarter, the portfolio the team will manage was valued at about $1.4 billion.

Banc of America Capital Investors is a private equity and mezzanine partnership that provides capital for growth financing, buyouts and recapitalisations, according to the bank's web site.

Bank of America is not selling the portfolio, the spokesperson said, and will retain economic interests in the funds.

Last year, Chet Walker, the founder of Banc of America Capital Investors, left the bank to form Forsyth Capital Investors. The firm launched a $100 million debut fund to invest in manufacturing, business services and distressed and turnaround opportunities.

About 30 private equity employees in total have left Bank of America. While the first group, consisting of 20 employees, is forming a new firm, a second, smaller group is joining asset manager Sterling Stamos to manage about $1.9 billion of limited partner interests Bank of America sold to AXA Private Equity earlier this year.

It's not clear why AXA is working with Sterling Stamos to manage the portfolio, but the employees from Bank of America joining the asset manager are familiar with the portfolio. AXA did not return a call for comment Monday.

Bank of America owns a minority stake in Sterling Stamos, which it inherited when it acquired Merrill Lynch in 2008.

Bank of America is shedding private equity assets ahead of regulations that will restrict bank ownership of illiquid assets. For example, unfunded stakes the bank sold to AXA as part of the $1.9 billion secondaries deal contain proposed capital reserve requirements under new banking regulations being discussed by the Basel Committee on Banking Supervision.

“We haven't seen the formal language under Basel III. [The proposed law] has requirements to hold capital against unfunded commitments. We have to evaluate that now and decide if that's an appropriate use of capital,” the spokesperson said.