JPMorgan mulls sale of LP stake in CCMP fund

The financial institution was an LP backer in the debut fund of its spin-out, CCMP Capital Advisors, which closed on $3.4bn in 2007.

Facing regulatory pressure to reduce its exposure to private equity, JPMorgan is exploring the sale of its limited partner interest in spin-out CCMP Capital Advisors’ debut fund, which the firm closed in 2007 on $3.4 billion, according to four people with knowledge of the situation.

The LP interest is more than $400 million, according to sources. It's not clear if the financial institution is mulling the sale of the full interest or a partial stake. Both JP Morgan and CCMP declined to comment.

CCMP spun out of JP Morgan Partners in 2006. The bank, in 2006, sold about 18 percent of its stake in JP Morgan Partners Global Fund, a $6.5 billion vehicle. Goldman Sachs and the Canada Pension Plan Investment Board bought $925 million of JPMorgan’s $5 billion interest in the fund at the time.

While it’s not clear why JPMorgan is selling its stake in the debut fund, known as CCMP Capital Investors II, sources have pointed out that the financial institution is under regulatory pressure to reduce the size of its private equity holdings. The financial reform law in the US, known as the Dodd-Frank Act, requires financial institutions to invest no more than 3 percent of their Tier 1 capital in private equity. Financial institutions regulated under the law are also restricted from representing more than 3 percent of any one fund’s total commitments.

Fund II was generating a net internal rate of return of 12.5 percent and a 1.41x investment multiple as of 31 December 2012, according to a market source.

CCMP launched its follow-on fund, CCMP Capital Investors III, last year with a $3.5 billion target. The firm is kicking in a 5 percent GP commitment in cash, according to a market source.

The firm earlier this year sold down its last remaining stake in women’s fashion retailer Francesca’s Collections for an overall return of about 4x, according to public filings with the US Securities and Exchange Commission. CCMP first invested in Francesca’s in 2010, took it public in 2011 and has gradually sold down its stake since then.