Banks set to create spin offs when regulations hit

PRIVATE equity analysts expect to see a wave of large investment banks reshaping their in-house private equity businesses as a result of new regulation restricting their investment activities.

Investment banks are increasingly spinning out all or parts of their captive private equity arms, research group Preqin said, in response to new regulation such as the Volcker Rule in the US. Deals include Bank of America Merrill Lynch’s decision to hive off its $6bn (£3.7bn) North Cove Partners firm in June.

“In the near future we expect there to be increased spin-out activity as banks re-organise to comply with regulatory requirements,” said Preqin research analyst Adam Counihan.

Some banks have opted for “a more fragmented approach,” he added, such as spinning off units with a speciļ¬c geographic or industry focus or investment style, such as foreign private equity operations.