ROYAL Bank of Scotland is in talks to spin off a £1.1 billion private equity fund in a management buy-out deal, a report claims.
RBS is said to be poised to offload the Special Opportunities Fund, one of its last-remaining investment arms. The report said the bank was "at an advanced stage of discussions" with SOF's management team led by Lindsey McMurray, a Strathclyde University graduate who has been 15 years in the industry and is a non-executive at £10bn investment group ICG.
The potential deal comes as the bank continues to pull back from non-core activities under the scrutiny of its 83% shareholder the Government, and reflects the trend among global banks to shrink their investment footprint in response to tighter capital requirements from international regulators.
RBS has already staged a major retreat from investment banking, and is likely to see the Special Opportunities Fund as an obvious candidate for spin-off or for outsourcing, under continuing pressure from all sides of politics to focus on consumer and small business lending.
The bank's new chief executive Ross McEwan will outline a revised strategy for RBS at its full-year results in February, amid fresh calls this week for the bank to be broken up following the publication of two critical reports relating to its treatment of struggling small business customers.
RBS holds a 13.5% direct stake in the SOF, said to be "a discrete third-party fund", which has made several new investments in recent years including in 2009 Arrow Global, the specialist debt recovery firm which floated on the stock exchange last month.
Arrow buys loans that have gone sour from banks and credit card companies and this week picked up the government's student loan debt for £900 million.
RBS still owns a third of the business through SOF following the listing. The fund also owns currency firm Moneycorp and financial services outsourcing group Target.
Among the other businesses SOF has been an investor in are Catalina, a Bermuda-based acquisition vehicle currently engaged in bidding for the insurance assets of the struggling Cooperative Group. SOF sold its stake in Catalina to Apollo Management earlier this year. It was also a shareholder in Four Seasons, the nursing home group.
Under the management of Ms McMurray, SOF has been shrinking its portfolio through a series of asset sales and flotations.
Ms McMurray joined RBS in 2002 from Cabot Square Capital, an investment firm then part of Credit Suisse First Boston, and runs SOF with three other executives, all London-based.
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