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Wells Fargo plans to cut $8 billion from its annual cost base over the next three years.
Wells Fargo has entered into an agreement with GTCR LLC and Reverence Capital Partners, L.P to sell its Asset Management arm (WFAM) for $2.1 billion.
WFAM has more than $600 billion in assets (the fourth largest in the US) under management and investment capabilities across diverse asset classes. It has 24 offices globally and employs 450 investment professionals. As part of the transaction, Wells Fargo will own a 9.9% equity interest and will act as a distribution partner.
GTCR and Reverence Capital expect to make substantial investments in technology and operational effectiveness and distribution and client support.
WFAM will continue to be led by CEO Nico Marais, who joined in 2017 and became CEO in 2019. Other existing management team members of WFAM are expected to continue in the firm.
Milton Berlinski, Co-Founder and Managing Partner of Reverence Capital Partners, said: “As an independent organization, WFAM will pivot to the next phase of its growth, and is positioned to expand on its solutions-based approach, multi-asset offerings, retail separately managed accounts, and customized investment products.”
GTCR will invest in WFAM from GTCR Fund XIII, a private equity fund raised in 2020 with $7.5 billion of limited partner capital. Reverence Capital will invest out of Reverence Capital Partners Opportunities Fund II, an investment pool with $1.2 billion of limited partner commitments, which was raised in 2020.
“This transaction represents a significant milestone in the growth and evolution of our firm,” said Marais. “Through this new partnership, our business will be even better positioned to execute our strategy and provide our clients with innovative products and solutions to help them reach their investment goals.”
GTCR will invest in WFAM from GTCR Fund XIII, a private equity fund raised in 2020 with $7.5 billion of limited partner capital.
Wells Fargo has been underperforming for the past few years and has undertaken cost-cutting and restructuring to improve its numbers. Wells Fargo plans to cut $8 billion from its annual cost base over the next three years, including more than 250 “efficiency initiatives” by streamlining operations around its most core businesses.
In December last year, the bank agreed to sell its $10 billion private student-loan book to Apollo Global Management Inc. and Blackstone Group Inc. It is planning to sell its corporate-trust business next, according to sources.
Former JPMorgan executive Charlie Scharf heads the bank. He announced the sale of its Canadian direct equipment finance business to Toronto-Dominion Bank. The WFAM deal is expected to close in the second half of the year if it meets all regulations.
“This transaction reflects Wells Fargo’s strategy to focus on businesses that serve our core consumer and corporate clients, and will allow us to focus even more on growing our wealth and brokerage businesses,” Barry Sommers, CEO of Wells Fargo’s wealth and investment-management division, said in the statement.
The asset management market has witnessed a spate of mergers and acquisitions in a bid to meet the changing needs of the economy, for better reach, and to get a share of the market away from the dominant competitors like BlackRock and Vanguard. Franklin Templeton acquired Legg Mason for $6.5bn a year ago, and Morgan Stanley swallowed rival Eaton Vance in a $7 billion deal. Activist investor Nelson Peltz bought 10 percent stakes each in Invesco and Janus Henderson in October.
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