Blackstone, the giant US private equity firm, is taking over the management of a portfolio of Asian real estate investments from Bank of America Merrill Lynch, opening the way for the group to expand its property business in Asia, the Financial Times said.

The deal was disclosed in a letter Blackstone sent its investors last Friday, the newspaper said. The transaction shows how banks such as BofA are pulling out of managing property and other private equity funds. Banks in the US are bracing for new rules that will force them to spin off some of their more risky trading activities.

The property portfolio has a value of about $2 billion, excluding debt, and consists of a mix of properties, some of which Merrill Lynch invested in directly from its balance sheet before its merger with BofA and others bought by Merrill funds with outside money, the report said.

Blackstone will help unwind the Merrill portfolio and will not acquire any assets from it, the report added.