In an effort to build its hedge fund offering and leverage on
the fund-of-funds market consolidation,
Wells Fargo & Co.
) acquired a minority stake in hedge fund firm, Rock Creek Group.
The financial terms of the deal were, however, not made public.
The acquisition in particular, was made by Wells Fargo Asset
Management unit through its Affiliated Managers Division.
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Established in 2002, Rock Creek boasts approximately $7 billion
in assets under management. This investment and advisory firm,
focused on investing in multi-manager portfolios of alternative
investments as well as in emerging markets, is one of the largest
fund of hedge funds in the U.S. with 100% institutional assets.
Rock Creek was founded by Afsaneh Beschloss, who currently serves
as its President and Chief Executive Officer. Formerly, she
chaired the position of Treasurer and Chief Investment Officer of
the World Bank and was involved in building the alternative
investments and private equity investments of the World Bank.
Following this deal, she will continue leading the 50-member Rock
While Wells Fargo will have a minority stake in Rock Creek, the
majority will continue to be held by the latter's management team
as well as its employees. However, in the following years, Wells
Fargo may further step up its investment in Rock Creek and
enhance its stake size.
The Industry Scenario
As a matter of fact, with declining margins and increased
withdrawals, fund-of-funds market is witnessing enhanced
consolidation. Earlier this year,
Franklin Resources Inc.
) purchased a majority stake in K2 Advisors, buyout of Prisma
Capital Partners by private-equity group,
Kohlberg Kravis Roberts & Co.
Man Strategic Holdings plc
) acquired FRM Holdings Limited.
Legg Mason, Inc.
) and its affiliate, Permal Group, announced the acquisition of
London-based fund-of-hedge-funds firm - Fauchier Partners from
BNP Paribas Investment Partners, an asset management unit of
BNP Paribas SA
We are encouraged with this strategic investment of Wells Fargo
in Rock Creek and expect it to be applauded by investors.
Notably, the company's growth plans have historically included
several acquisitions, Wachovia, being the largest addition in
Since 2011, the company has completed a number of transactions,
which include both loan portfolio purchases as well as business
unit acquisitions. The company plans to expand its operations in
international markets and augment its asset management business.
Wells Fargo has demonstrated its ability to assimilate local
franchises, offering a wider range of products than the acquired
company could have, thus increasing the number of options for the
customers. This has been the driving force behind its growth in
the recent years.
Wells Fargo currently retains its Zacks #3 Rank, which translates
into a short-term Hold rating. This stake acquisition is expected
to benefit Wells Fargo and thereby may lead to upward earnings
estimate revisions. This, in turn, could cause an upgrade in its