Barclays agrees to sell iShares

Barclays Bank has agreed a deal to sell its iShares asset management business as it looks to raise cash and avoid turning to the government for aid.

The exchange traded funds (ETFs)provider is being sold to private equity firm CVC Capital Partners for £3bn ($4.4bn).

However, Barclays is providing £2.1bn of financing for the deal – in effect a loan to CVC to help it buy iShares.

Shares in Barclays jumped 10% as a result of the announcement.

“This transaction realises significant value for Barclays,” said the bank’s chief executive John Varley.

“iShares has experienced rapid growth over the past several years and has reached a point where it can develop further on a stand alone basis,” he added.

Cheap access

Barclays will still maintain links with iShares.

“Barclays shareholders will benefit from a reinforcement of our capital base and an ongoing commercial relationship with iShares,” said Mr Varley.

The iShares funds have proved very popular in the US, but have yet to really take off in the UK.

ETFs are listed shares that pool investors’ money and track the performance of particular indexes.

They are a cheap way for private investors to gain access to many different shares through a single holding. For example, the iShares FTSE 100 will track the performance of the FTSE 100 through a single share.

The iShares business is the world’s biggest manager of ETFs, and is part of San Francisco-based Barclays Global Investment.

While other High Street banks have accepted government money to help them through the credit crunch, Barclays has chosen instead to raise finance privately.

Last year, the bank raised £7bn from investors in the Middle East.

The bank has also not taken part in the government’s insurance scheme for toxic assets.

The Asset Protection Scheme uses government money to insure banks’ riskiest assets against further losses.

Barclays reported profits before tax of £6.08bn for 2008.