Deutsche Bank is planning to reduce the allocation of capital to its private equity business from its own balance sheet as it seeks to build the operation by generating income from outside investors, according to the Financial Times.
Graham Clempson of DB Capital Partners told the newspaper that the move did not represent a reduced commitment to private equity, saying the bank's restructured private equity arm was now at a point where it was capable raising funds from third party investors.
The bank aims to use its own network to distribute a number of its products including a E500m fund of funds. This is in addition to an existing $300m fund of funds and a $250m secondaries fund.
Deutsche Bank said the group had achieved a gross annual internal rate of return of 26 per cent on its US and European later-stage investments over the past five years. In Europe the company showed an internal rate of return of 46 per cent.
DB Capital invested E500m in later stage deals in 2001, compared with E1.5bn for the previous year. In the second and third quarters of 2001, Deutsche wrote down its portfolio of direct private equity investments by E300m to E2.5bn. The DB Capital portfolio totals E10bn, of which E4.3bn is invested by the bank in other private equity funds.