SYDNEY - Deutsche Bank AG has sold its Australian private-equity operations to two local executives who have set up a boutique business, undeterred by the turbulence in international markets.

The sale is the most recent leg of Deutsche Bank's global exit from the volatile business of direct private equity, which the German securities firm has undertaken in stages since early this decade.

"This change is consistent with the global trend of successful private-equity teams shifting from captive to boutique ownership and has been well supported by our private-equity investor clients," Chum Darvall, chief executive of Deutsche Bank in Australia and New Zealand, said in a prepared statement. Details of the transaction weren't disclosed.

The sale of DB Capital Partners to two of its former directors, Peter Dowding and Albin Kurti, comes as the outlook for the private-equity market globally is particularly uncertain given the impact of the U.S. subprime-mortgage downturn on credit markets.

Messrs. Dowding and Kurti, who have steered the Deutsche Bank unit for more than seven years, are optimistic about the outlook for the business, which has A$450 million, or about US$375 million, invested in private equity across two funds. It has more than 20 Australian and overseas institutional investors, including some of Australia's largest pension funds.

Mr. Dowding said the funds focus on buying significant minority and controlling stakes in businesses with enterprise values of A$50 million to A$250 million. "That middle market is a consistent and strong source of opportunity," he said.

Messrs. Dowding and Kurti each will have a 50% stake in the company and serve as managing director.

The pair will take DB Capital's staff of seven to their own newly created company, Propel Investments, and plan to raise A$250 million to A$350 million from investors by the end of next year for a new private-equity fund.

While some major private-equity deals have been abandoned because of funding concerns in recent weeks, Mr. Dowding said Propel has just completed the acquisition of an initial 30% stake in engineering consulting group Advanced Well Technologies, which is based in Perth, Australia.

"That is an example of a deal that we are doing at the moment, and there are other opportunities that we are working on," Mr. Dowding said. "So while there have been issues at the higher end of the market where there is the need for significant debt funding, in our sort of middle market we continue to do deals as demonstrated by this one we just closed."

They said the performance of the funds hasn't been and won't be affected by the wave of risk aversion that is sweeping the globe.

Deutsche Bank plans to maintain a close relationship with Propel.