Mario Tama/Getty ImagesSince taking over as chief executive, Jamie Dimon has gradually reduced JPMorgan’s exposure to the risky business of buying and selling companies.Jamie Dimon has long had a complicated relationship with private equity. Since taking over as chief executive of JPMorgan Chase in 2005, Mr. Dimon has gradually reduced the bank’s exposure to the risky business of buying and selling companies.
On Friday, Mr. Dimon announced that JPMorgan’s last remaining private equity unit, One Equity Partners, would be spun out into a separate company and raise its next fund as an independent firm.
The move comes as banks are facing regulatory pressure to reduce their exposure to risky businesses, but the divestment of One Equity, which manages $4.5 billion of the bank’s money, was not in response to that, according to a person briefed on the matter.
Instead, this person said, the decision is a reflection of JPMorgan’s emphasis on its client businesses rather than making investments off the firm’s balance sheet. Last year, the bank was buffeted by a multibillion-dollar trading loss by its chief investment office in London.
The One Equity business is the legacy private equity arm of Bank One, the Ohio bank that Mr. Dimon ran and sold to JPMorgan in 2004. At that time, JP Morgan had two other private equity divisions — JPMorgan Partners, a unit that made a broad range of investments, and Corsair, an arm that invested in financial services.
Mr. Dimon took over as chief executive of the combined company in 2005. That year, the bank surprised Wall Street by keeping the smaller One Equity Partners and splitting off the bigger business. JPMorgan Partners is now an independent private equity firm called CCMP, and Corsair was spun out in 2006 into an independent firm.
One of the bank’s reasons for de-emphasizing its private equity investments — especially the ones that were made by its largest unit, JPMorgan Partners — is that it didn’t want to be in businesses that directly competed with some of its prized private equity clients, like Blackstone Group and Kohlberg Kravis Roberts. JPMorgan’s investment bank has a very lucrative business both advising and making loans to the world’s largest buyout firms.
One Equity was started in 2001 by Dick Cashin, its managing partner and a former Olympic rower. Among the firm’s more successful deals were its buyout of the health care company Quintiles and its acquisition of Polaroid out of bankruptcy. Jacques Nasser, the former chief executive of the Ford Motor Company, is a One Equity senior executive. The firm will continue to manage its existing portfolio of investments for JPMorgan, and sell them off over time.
“I have worked with the team at OEP for the past 12 years and have a lot of respect for all that they have accomplished and the great value they have delivered to the firm,” Mr. Dimon said in a statement.
JPMorgan’s decision to divest itself of One Equity comes as the debate over the Volcker Rule drags on. The passage of the Dodd-Frank financial overhaul in 2010 placed restrictions on how much capital banks could invest in hard-to-sell assets like private equity.
A number of banks have jettisoned much of their buyout operations, including Bank of America and Citigroup. But with the continued uncertainty surrounding the Dodd-Frank law, others have maintained their private equity arms, like Goldman Sachs Capital Partners and Morgan Stanley Global Private Equity.