Another bank has severed management ties with an in-house venture capital investment division--a growing trend as the private equity industry gears up for a banner year.

Bank of America said its BA Venture Partners is now operating independently under the new name Scale Venture Partners. The firm has a new $400 million fund and is seeking up to 10 institutional investors. Bank of America will be one of them. Separately, the Charlotte bank has also severed management ties with its European venture capital division, Argan Capital, though it will also continue as an investor there.

The moves follow JPMorgan Chase's split from its JPMorgan Partners private equity division in August. JPMorgan Partners split into CCMP Capital Advisors, which manages the buyout and growth equity investments, and Panorama Capital, which manages venture investments. JPMorgan Chase continues to invest in the funds and in midsized management-led buyouts and growth equity companies through its One Equity Partners unit.

Bank of America will also continue to do medium-sized deals through its BA Capital Investors private equity division.

Private equity has been a highly volatile business over the last decade, with huge gains in the late 1990s followed by sharp losses when the New Economy bubble burst. The extremes in profits and losses irked investors in bank stocks like JPMorgan, which eventually admitted it was overexposed to the business.

Moreover, competing against clients has been a big conflict for banks to navigate. There has been a resurgence of interest in private equity investing in the last couple of years, particularly by hedge funds and other investors chasing higher-yielding products than they can find elsewhere in the market.

Low interest rates and a flood of cash from these yield-hungry investors are creating a boom for private equity, venture and buyout funds, from the very largest like Carlyle Group, Blackstone and Kohlberg Kravis Roberts & Co., to the smallest firms. And of course a boom for them means a boom for the banks that help arrange the loans and bond offerings they use to complete their deals.

JPMorgan and other banks, like Credit Suisse, decided to refocus on middle-market transactions that wouldn't put them in competition with firms like Carlyle and Blackstone on the big buyout deals, eliminating conflicts that could keep them from getting other business from the firms.

But Goldman Sachs has continued to push ahead in bidding as a private equity investor in the biggest transactions, and rivals like Merrill Lynch have been trying to play catch up. One stunning recent example: Merrill not only put up its own capital in the $33 billion HCA buyout announced this fall, it advised the consortium (which also includes Bank Capital and Kohlberg Kravis) and is co-leading the debt financing with Bank of America, Citigroup and JPMorgan.

In November, Merrill cashed out on its 2005 private equity investment in Hertz, when the rental car company went public with a $1.3 billion offering.

Like their hedge fund cousins, private equity fund managers get paid hefty management and performance fees annually, and banks eager to stay in the business have had to keep pace with the big funds to prevent talent from jumping ship.

For Bank of America, shedding two of its venture capital units while keeping the third was more of a strategic decision to focus on its "universal" bank model, in which the private equity business is an integrated part of the bank and presumably would bring considerable underwriting and advisory business on behalf of its portfolio clients.

Scale Venture Partners had operated autonomously anyway. "We launched our first fund in 2000 with the goal of eventually bringing in outside investors," said its managing director, Kate Mitchell.

Last year Scale Venture cashed out on eight of its investments, including two initial public offerings of portfolio companies and four sales. Another two of its companies are in registration for IPOs.

A December survey of members of the National Venture Capital Association suggests more busy activity this year. Some 79% of respondents predicted venture firms will raise similar-sized or larger funds this year.

There will also be more competition. Nearly 62% of members in the survey said they expect to see hedge funds try to butt into their business, while 48% of members predicted that buyout funds would try to do the same.