Wells Fargo Asset Management acquired a 35% stake in institutional hedge funds-of-funds manager Rock Creek Group with the option to acquire a majority stake over time.
The deal was finalized this month; the date as well as terms of the deal are not being disclosed, said Michael Niedermeyer, the firm's CEO, in an interview.
Client demand for hedge fund investments sent WFAM out on the acquisition trail, Mr. Niedermeyer stressed.
“What's driving this is that we have a product gap. Few firms of our size are without this capability. This is a pretty straightforward deal to meet client demand,” Mr. Niedermeyer said.
Mr. Niedermeyer said Wells Fargo's asset management business model combines the capabilities of multiple independent investment boutiques.
Rock Creek Group will continue to operate independently, under its own name from its Washington headquarters.
WFAM manages $450 billion, about 70% of which is for institutional investors. Rock Creek Group manages $7 billion in commingled and separate hedge funds-of-funds accounts as well as in customized hedge funds-of-funds strategies.
Afsaneh Beschloss, Rock Creek Group's CEO and chief investment officer, said in an interview that one of the advantages of the new relationship with Wells Fargo is its “global infrastructure. Wells Fargo has offices all over the world, and we are very involved in finding emerging markets hedge funds. We will be able to move analysts to offices in these countries more rationally than if we had to set up outposts ourselves.”
Rock Creek Group doesn't have a large marketing force, Ms. Beschloss said, noting that adding the firm's hedge funds-of-funds strategies to Wells Fargo's large global distribution network likely will result in new net inflows.
The sale of part of the firm's equity to WFAM provides Rock Creek's 10 partners with “a market value on the equity they hold. It no longer is mere shadow equity,” Ms. Beschloss said, and that knowing “what your ownership stake is worth will be an incentive to stay with the firm and in recruiting new employees.”