Wells Fargo & Co., the biggest U.S. bank by market value, bought a stake in Rock Creek Group LP to provide more hedge-fund offerings to clients amid a push to double the asset-management unit within seven years.
The lender purchased a 35 percent stake in the Washington-based firm and has an option to make a controlling investment over time, Wells Fargo asset-management chief Mike Niedermeyer said in an interview. Rock Creek oversees about $7 billion as a fund-of-hedge-fund business, giving clients access to handpicked hedge funds and emerging markets, the bank said in a statement, which didn’t disclose financial terms.
“We view this as one of the fastest-growing segments in the asset-management business,” said Niedermeyer, whose business manages $450 billion for customers at San Francisco- based Wells Fargo. “While it’s of a greater interest to larger clients, it’s quickly becoming a larger area of focus for middle-size and smaller endowments, and state pension funds.”
Chief Executive Officer John Stumpf, 59, has sought to expand businesses that are less likely to be hampered by new global banking regulations and record-low interest rates. In April, Wells Fargo announced it would buy Merlin Securities LLC, a prime brokerage that caters to hedge funds and other clients with as much as $2 billion in assets.
Client Needs
“Our clients have expressed their desire for increased alternative investment solutions, and this partnership allows us to meet those needs,” Niedermeyer said in the statement.
Rock Creek, in addition to picking hedge funds, also has tools that allow clients to analyze portfolios and stress-test investments, Niedermeyer said in the interview. The firm has about 50 employees and is run by Afsaneh Mashayekhi Beschloss, a former World Bank chief investment officer.
Wells Fargo made the investment through a unit within asset management that groups together boutique asset managers and lets them keep their investment processes independent, according to the statement. The unit is run by Tom Hoops.
Wells Fargo will double its asset-management unit within seven years by expanding in international markets and investing in more alternative-asset funds, Niedermeyer said in an interview earlier this year when the unit managed $444 billion.
The purchase of the Rock Creek stake shows Wells Fargo “wetting their feet” in alternative-asset managers, said Karl D’Cunha, senior managing director at Madison Street Capital, a Chicago-based investment bank. Wells Fargo also owns a minority stake in Overland Advisors LLC, a hedge fund that was started in January 2010 when the bank decided to segregate a proprietary- trading group.
