BlackRock Launches Private Equity Unit Run by Merrill Lynch Veterans

Announcement follows last week’s purchase of $2.5 billion in Bank of America shares

BlackRock Inc. (BLK) announced Monday that it has added private equity to its stable of alternative offerings with the addition of a team led by recent veterans of Bank of America’s (BAC) Merrill Lynch Global Private Equity.

The BAML Global Private Equity executives joining BlackRock include Nathan Thorne, George Bitar and Mandy Puri. All three have joined as managing directors and form the leadership team of the BlackRock Global Private Equity platform, which is expected to include approximately 20 professionals within the next year, according to a BlackRock news release.

The three executives were co-founders of BAML Global Private Equity. Thorne was chairman and president, Puri was chief investment officer and Bitar was co-head of North America.

They will report to Matthew Botein, managing director and head of BlackRock Alternative Investors. As of March 31, BAI represented $115.3 billion of assets under management and included the firm's hedge funds, hedge funds of funds, real estate, private equity funds of funds, opportunistic investment vehicles, commodities and currencies. As of March 31, BlackRock’s total assets under management were $3.65 trillion.

"BlackRock looked at a great number of opportunities as we sought a leadership team that could substantially accelerate our entry into this business, with a focus on identifying a team with a proven record of disciplined private equity investing," Botein said in a statement. “Equally important, however, we needed a team that knew how to navigate and leverage the sourcing, diligence and financing advantages presented by being a part of a financial institution with the global footprint and operational scale of BlackRock. We found that in this team.”

Monday’s announcement culminates a number of transactions recently made between BlackRock and Bank of America, with BlackRock—already the world’s largest money manager—clearly using the deals to move from strength to strength.

BlackRock and Bank of America last Thursday announced that they have entered into a deal for BlackRock to buy back BofA’s stake in the company for $2.5 billion. In 2006, Merrill Lynch sold its asset management division to BlackRock in exchange for a 49% share valued at $9.4 billion, helping BlackRock become a global powerhouse.At the height of the financial crisis in 2008, Bank of America acquired the shares when it bought Merrill Lynch.

Bank of America’s exit from its private-equity buyout business reflects a trend among big banks to extricate themselves from stricter principal-investment regulations following passage of the Dodd-Frank reform bill’s Volcker rule. Bank of America will continue to own its former private-equity team’s investment portfolio, valued at approximately $5 billion at the end of 2010, and will now focus on monetizing the portfolio.

Thorne, Bitar and Puri will oversee the build-out and “ensure the connectedness of private equity to BlackRock's global investment platform,” comprised of more than 1,500 investment professionals that will provide the team with insights into industry dynamics, companies and management teams, according to the news release.

Thorne, Bitar and Puri began working together at Merrill Lynch in 1990 and went on in 1994 to found Merrill Lynch’s private equity business, where they remained until 2009 under Bank of America Corp. Private equity investments in which the team was involved include HCA, Debenhams and Hertz.

"We're delighted to be bringing a proven private equity investment team to BAI," said BlackRock President Robert Kapito in a statement. "As Matt and his team have worked to round out our alternative offerings, we recognized that this particular business was the most important gap in the alternatives portfolio and one in which we have a clear competitive advantage."

Read ‘BofA Merrill Spins Off BAML Capital Partners Private-Equity Unit to Managers’ at AdvisorOne.com.

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