Barclays spin-out ‘dependent on fundraising’

Barclays Private Equity, the mid-market private equity subsidiary of Barclays Bank, will spin-out from its parent only when enough capital has been committed to its next fund, said a source close to the situation.

Barclays Private Equity declined to comment.

A split between BPE and its parent has been the topic of speculation for more than a year. UK newspaper The Daily Telegraph reported Monday that the captive unit had agreed to spin out from Barclays Capital by October this year, and will attempt to raise its first fund of around £1.8 billion (€2.1 billion; $2.6 billion).

However, no fund size has yet been agreed, said the source, who explained that ranges of fund size had been discussed with LPs, and these were “not a million miles away” from £1.8 billion.

The team’s last fund – its third – closed on €2.4 billion in 2007 and is understood to be 70 percent invested. Marketing for Fund IV has not yet begun, the source said, and the agreed spin-out would be dependent on the fund reaching a certain size at first or final closing.

Investors in BPE’s third fund include funds of funds Allianz Private Equity Partners, shaPE Capital and SL Capital Partners as well as US endowment University of Texas Investment Management Company and the UK-based West Yorkshire Pension Fund.

BPE is one of a number of European firms plotting to raise a new fund in what is still a tough market to attract LP capital commitments. BC Partners intends to begin marketing a €6 billion fund in September, while Montagu Private Equity and Palamon Capital Partners are also expected to begin marketing processes this year.