BofA’s Captive PE Fund Spins Out

Banc of America Capital Advisors’ private equity team is being spun off from the investment bank. The newly independent group has assumed the name, Ridgemont Equity Partners.

Coming on the heels of legislation aimed at overhauling the financial services sector, the Volcker Rule looms over the spinoff. The legislation hits a bank's alternative investing activities in a few key ways. Most notably, a bank's investment in alternative assets cannot exceed 3% of all money invested in the fund. Beyond BofA, banks such as PNC, KeyCorp and JPMorgan Chase are all affected.

Charlotte-based Ridgemont, which has already invested more than $3 billion as a captive fund, will seek to raise a new vehicle. A target for the new fund has yet to be divulged. Ridgemont Equity partner Travis Hain did say the investor base will consist of “all new LPs.”

Additionally, said Trey Sheridan, another partner with Ridgemont, the firm has made several hires to further its fundraising process.

Hain went on to say that Ridgemont is in the process of selecting a placement agent to assist it in its efforts and that the PE firm will have access to Bank of America capital to fund its deals in the interim. The principals of Ridgemont will continue to manage the legacy Banc of America Capital Advisors portfolio on behalf of BofA.

“Our strategies aren’t affected,” Hain said.

However, the PE firm is making some changes. It will no longer pursue mezzanine deals and co-investments, Hain said, and while it uses BofA capital, it will not have the ability to do deals alongside financial institutions.

The private equity firm has a history of investing in the consumer and retail, energy, healthcare, tech and telecom, and financial services industries.

Sheridan notes that the firm will have sufficient capital at its disposal and added that multiple deals are expected to be unveiled in the coming months.

While captive PE groups have found success raising capital, some prefer working with a larger institution that can provide a steady stream of dealflow. Trilantic, which spun out of Lehman Brothers last year, recently sealed a partnership with Evercore Partners that will see the boutique steer investment opportunities its way. MetalMark, meanwhile, spun out of Morgan Stanley only to sell itself to Citigroup in 2007, only a few years after it became independent.