Banc of America Securities is looking to sell its fund-linked structured products platform, which rivals described as the most successful in the U.S. Calls to Jason Griffith, global head of the bank's hedge fund investors group in New York, were referred to spokeswoman Jennifer DiClerico, who declined comment. The fund-linked group structures derivatives referenced to hedge funds.
BofA's decision goes against the trend. Several firms, including Barclays Capital, SG's Lyxor Asset Management and Deutsche Bank, are pumping resources into these businesses in an attempt to replicate their success in Europe (DW, 1/10).
"[BofA's decion] seems to be a re-analysis of the risk-reward relationship of that business," said a rival, explaining that while hedge funds have been profitable, they may be at their peak due to saturation. "There may be a major global correction and [the bank] doesn't want to be caught short," the official said.
In this type of sale, banks bring in firms who, after signing a letter of confidentiality, are shown the firm's positions. Possible suitors then decide whether the platform's revenue is worth the risk. Typically, only deep-pocketed firms take on this type of risk. The source said European banks are rumored to be seriously interested, which makes sense because the platform offers a catapult into the U.S. market. BNP Paribas bought a similar portfolio from New York-based Zurich Capital Markets in the summer of 2003. "It was a very good acquisition for BNP," the official said.
Inside politics may also be driving the sale. Jonathan Sandelman, global head of debt and equities in the bank's New York office, resigned in October. "It could be a changing of the guard," noted an official.
