Bankers Trust New York Corp. is pumping an extra $500 million into its equity investment program as part of a drive to expand such investments outside the United States.
Douglas Brent, newly named managing director for the bank's global strategic investment group, said the company is also expanding its staff in New York, Los Angeles, London, and Asia and will set up a team specializing in investments in Latin America.
"We have a strategic advantage in doing this kind of business because of our global reach and local presence," Mr. Brent said.
He also said the company would use its risk management services to hedge currency and country risk for overseas investments.
Bankers Trust is scouring Mexico, Chile, Brazil, and Argentina for investments. The other major area Bankers Trust is targeting is Asia, including Thailand, Taiwan, Indonesia, Malaysia, South Korea, and, with less emphasis, China.
The bank plans to invest $5 million to $25 million in individual companies where it can acquire up to 20% of the voting stock and 40% of overall equity - the maximum it is allowed to acquire under Regulation K of the Bank Holding Company Act.
Bankers Trust is one of several money-center banks that are increasing their equity investments in the hope of generating higher returns on capital.
Chemical Banking Corp., for example, has about $2 billion invested in equity; Chase Manhattan Corp. has invested more than $500 million.
Within the United States, banks are restricted under the Act's Regulation Y from acquiring more than 4.9% of the voting stock and 24.9% of overall equity.
Investments carried out separately through small business investment companies are not restricted, but banks must file an exit strategy plan when they make their acquisitions.
Bankers Trust currently has about $400 million in direct equity investments and several hundred million dollars more in passive investments in equity funds.
Most of the investments to date have been in U.S. companies or funds, but the bank believes it can leverage its international expertise and research to develop investments abroad.
As part of the drive to boost equity investments, Bankers Trust has combined two units, BT Capital Corp. and BT Investment Partners Inc., into a single entity called BT Capital Partners Inc.
The bank said it hopes to get a 30% annually compounded rate of return for its equity investments.
These investments typically have an average life of four to 4#1/2 years, Mr. Brent said.