JP Morgan to Shed Private Equity Arm

March 1, 2005 ( - JP Morgan will shed its private equity arm next year, according to sources quoted by the Wall Street Journal.

Also confirmed by Reuters, it seems that the bank will spin off JP Morgan Partners LLC when it completes investment of its current $6.5 billion Global Fund. However, the bank plans to keep the smaller private equity firm that was previously part of Bank One Corp. Morgan was expected to spin off the unit – known as One Equity Partners – but now plans to hold onto it.

The relationship  will continue to exist, Reuters is reporting. The bank has stated that it will invest up to $1 billion in a new fund that the independent firm plans to raise after the Global Fund is completely invested. Jeffrey Walker, the head of JP Morgan Partners, will continue to run the group, according to the Journal.

JP Morgan Partners currently has $13 billion in capital under management, and has a stake in 767 firms. About 60% of the Global Fund has been invested to date. The new fund, however, will be renamed to not include the Morgan name.

This move signals a victory for independent private equity firms, according to the Journal. Firms such as Blackstone Group and Kohlberg Kravis Roberts & Co have long yearned for the banks to drop their private equity arms. Because they give Wall Street hundreds of millions in transaction fees a year, they do not hesitate to let it be known that they do not like competition from the very banks they give business to, according to the Journal.

“When banks like J.P. Morgan are competing with us, it makes it more difficult to work with them on financing and merger advice,” William Price, one of the three founding partners of Texas Pacific Group said in Davos, Switzerland, several weeks ago, according to the Journal.