3i Group, moving away from its traditional role as a private equity fund, on Thursday announced a joint venture with U.S. fund manager WCAS Fraser Sullivan Investment Management to build a global debt management business.
London-listed 3i (III.L) was set up after World War Two to play a role in financing reconstruction of Britain, but in recent years private equity has produced lackluster returns and it has been shifting its focus to debt and infrastructure investment.
The deal takes assets under management in 3i's debt arm, established less than two years ago, to $10.2 billion, the company said. In its debt business, 3i manages funds that invest in company debt.
3i will take an 80 percent stake in the new venture, 3iDM US, and Fraser Sullivan's senior executives will hold the remaining 20 percent, with 3i expected to take full control of the business after three years.
The deal follows an early agreement in late May to buy a clutch of debt funds from Invesco.
"Our debt management business now has significant scale across both Europe and the US, and we look forward to further growing this business, both organically and though acquisition, as opportunities arise," said CEO Simon Borrows.
The move contrasts with the cutbacks in 3i's private equity business, which Borrows announced in June, with the group axing more than a third of its staff, closing offices around the world and suspending new deals in Southern Europe and Asia.
New York-based Fraser Sullivan employs 13 professionals and has some $2.5 billion of assets across collateralized loan obligation funds, a senior loan fund and a credit opportunity fund.
3i shares, which have climbed some 25 percent from May lows, were little changed at 210.2 pence at 0730 GMT.
This article is copyrighted by Reuters
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