Increasingly restrictive laws such as SOX have spurred growth in private equity funds. Business week reports that banks have been turning to private equity funds for diversification, but this is not true for all:

“..some banks are distancing themselves from the business, in part to avoid conflicts of interest with hedge-fund clients, Hebeka explains. J.P. Morgan Partners, a private-equity unit of JP Morgan Chase (JPM; ranked 4 STARS), will become independent when it completes the investment in its current $6.5 billion Global Fund, which is expected to happen this year. Meanwhile, Morgan Stanley (MS; ranked 3 STARS, hold) established an independent private-equity firm, called Metalmark Capital, which will manage the more than $3 billion-strong Morgan Stanley Capital Partners funds through a long-term sub-advisory role.”

From BusinessWeek