GTCR and Reverence Capital Partners intend to add Wells Fargo Asset Management as a newly independent platform with increased technology and innovation capabilities, Michael Hollander, managing director at GTCR, told PE Hub.
On Tuesday, the firms announced plans to carve-out the asset management arm of Wells Fargo investment bank for $2.1 billion. Wells Fargo Asset Management has more than $600 billion in assets under management.
As part of the deal, Wells Fargo will continue to own a 9.9 percent equity stake and will continue to serve as client and distribution partner, according to the announcement.
GTCR, which took a minority position in wealth manager CAPTRUST Financial Advisors in June 2020, sees a long-term opportunity in the asset management space, Hollander told PE Hub.
“What intrigues us about the space is it’s a big part of the economy and it’s something that is critical for the end customers generally: folks are using asset management firms to invest their retirement assets or personal wealth assets broadly,” Hollander said.
Unlike some firms, GTCR finds value in the human capital component of the asset management business model.
“I think some investors will stay away from asset management because it does have a human capital element,” Hollander said.
While the asset management space has seen some flows into the digital channel and robo-advisor strategy, GTCR’s diligence has shown that by and large people still prefer in-person interactions with those who manage their assets and help make investment decisions, the investor added.
“We think that great people make a good business a great business. The thing that excited us most about this platform as we were doing our diligence was the quality of the team that starts with CEO Nico Marais.”
Having a platform of scale like Wells Fargo Asset Management also allows GTCR to focus on improving the technology capabilities versus only chasing the expansion component, Hollander explained.
“When you have scale, you can invest in technology that investors and portfolio managers use and you can afford to invest into distribution infrastructure to help connect the investors with the folks who want to use their services on the institutional side or on the retail side,” Hollander said.
Those kinds of technological improvements are what GTCR plans to focus on with the Wells Fargo platform.
“We plan to invest in a technology suite that will streamline the trading and operations functions of the business across all asset classes,” Hollander said. “We also plan to invest further in reporting capabilities and in capabilities around how Wells Fargo Asset Management delivers its products to its clients.”
After the carve-out work for the company is completed, GTCR sees opportunity in growing the Wells Fargo Asset Management platform through strategic M&A.
“There is a tremendous amount of acquisition opportunities that we think would be pretty synergistic with Wells Fargo and so I think we would look to make further investments that enhance our product capabilities and geographic capabilities,” Hollander said.