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JPMorgan Said to Break Up Hedge Fund, Buyout Unit

Date: Wednesday, June 3, 2009
Author: Saijel Kishan and Elizabeth Hester, Bloomberg

JPMorgan Chase & Co. is disbanding an investment-banking unit that wagers the company’s money on hedge funds, leveraged buyouts and real estate, two people familiar with the plan said.

The second-largest U.S. bank by assets will shut the principal investment management group’s hedge-fund business and its private-equity division, except for a team that focuses on Asia, said the people, who asked not to be named because the decision hasn’t been publicly disclosed. Most of the group’s 150 employees will move to other parts of the New York-based bank.

JPMorgan, led by Chief Executive Officer Jamie Dimon, closed its global proprietary trading unit in November and moved some of the employees to other desks to scale back on risk. Credit Suisse Group AG, Switzerland’s largest bank by market value, and Deutsche Bank AG, Germany’s biggest lender, also curbed trading for their own accounts after posting losses.

“Banks invested in hedge funds for a variety of new business opportunities which aren’t likely to be around again for some time,” said Peter Hahn, a former managing director at Citigroup Inc. and now a fellow at London’s Cass Business School. “One has to ask, is this just another demonstration of large financial institutions getting back to narrower focuses on businesses they understand and do well.”

Bob Case

Bob Case, the head of principal investments at JPMorgan, may be given another post, the people said. He joined the bank in 2007 from Citigroup, where he was chief administrative officer of a unit that ran hedge funds.

A message left for Case wasn’t immediately returned. Tasha Pelio, a JPMorgan spokeswoman, declined to comment. The bank doesn’t disclose financial results for Case’s group.

JPMorgan is closing Case’s private-equity division, which invested in companies including Avaya Inc., the Basking Ridge, New Jersey-based telephone-equipment maker, the people said. One Equity Partners, a separate buyout unit that isn’t part of principal investment management, won’t be affected, the people said.

The bank will keep Case’s Asian private-equity team, which has stakes in companies such as Chinese cement maker Tianrui Group Cement Co. The Asia unit and a squad that makes so-called mezzanine investments will join an emerging markets and credit trading business run by Daniel Pinto, the people said.

JPMorgan is integrating Case’s real-estate team, which has investments in land and hotels, into the securitized-products business led by Brian Baker, global head of commercial mortgages, according to the people familiar with the plan.

The tax-oriented and structured-investing segments of Case’s group will be assigned to a securitized products unit led by Craig Delany, head of global financing, the people said. Baker and Delaney report to Matthew Zames, head of rates, currencies and securitized products.

To contact the reporters on this story: Saijel Kishan in New York at skishan@bloomberg.net; Elizabeth Hester in New York at ehester@bloomberg.net.