Wells Fargo, primarily known as a major banking outlet, is attempting to enter the fund of funds space. The move is similar to recent acquisitions in the industry, with Kohlberg Kravis Roberts acquiring Prisma Capital Partners, and Franklin Templeton Advisors acquiring K2 Advisors.
“We are keen to provide advice on alternatives allocations,” Wells Fargo Asset Management CEO Mike Niedermeyer told Financial News. “It is the thing our clients request most often.”
Wells Fargo hopes to acquire a fund of funds firm that has between $5 billion and $12 billion. Acquiring such a firm, rather than starting its own hedge fund, would enable better management and development opportunities for Wells Fargo.
Niedermeyer notes that while the public perception of fund of funds appears to be fragile, the industry model will need to change in the future, and Wells Fargo will be at the forefront of that change.
Fund of funds is a type of multi-tiered investment strategy in which investors hold funds rather than directly investing in stocks or bonds. Fund of funds include mutual funds, hedge funds, private equity and investment trusts. Companies such as EnTrust Capital Inc., where Gregg Hymowitz is a managing partner, are responsible for managing fund of funds worth over $7.5 billion.
Wells Fargo is the fourth largest bank in the United States in terms of assets and the second largest bank in terms of deposits, home mortgage servicing and debit cards.