In Quest to Become the NYSE of Alts, iCapital Network Acquires Wells Fargo Platform

In its quest to become as ubiquitous as the New York Stock Exchange, iCapital Network announced Thursday it acquired an alternative investment platform from Wells Fargo’s Global Alternative Investments division.

Founded in 2013, New York City-based iCapital Network will now service almost $58 billion in hedge funds, private equity, private debt, real estate, and other assets across more than 720 funds and 120,000 underlying accounts. More than 70 companies, including Wells Fargo (NYSE: WFC), white label the platform to help financial advisors buy and sell alternative investments.

Lawrence Calcano, CEO of iCapital Network, said his company worked with Wells Fargo for years before the bank approached him in 2019 about partnering and using iCapital exclusively to manage the bank’s alternative investments feeder funds. The transaction will allow the bank to offer more innovative alternative investment solutions and “upgrade the overall platform and launch new offerings,” Darrell Cronk, president of Wells Fargo Investment Institute, said in a statement about the deal.

Wells Fargo will become an investor in iCapital and the bank’s Global Alternative Investments division in Boston will stay there, but join iCapital. Terms of the deal were not disclosed and it’s expected to close in the second half of 2020.

The deal is the latest example of a recurring narrative. Companies looking for ways to automate and improve the buying and selling of alternative investments begin working with iCapital, and then increasingly use it or adopt it as their system entirely. Like with Wells Fargo, companies don’t want to rely on two different infrastructures to manage alternative investments, Calcano told RIA Intel.

Companies determine the menu of investments available to their advisors, who then consider and deem which ones are appropriate for their clients.

Wells Fargo is part of the cohort of iCapital investors that helped it raise a $146 million round of funding. Others included Ping An Global Voyager Fund, Goldman Sachs, Affiliated Managers Group, Hamilton Lane, and WestCap — all that were first-time investors. The list of previous investors is also long and includes BlackRock, Blackstone, BNY Mellon, The Carlyle Group, Credit Suisse, JPMorgan Chase & Co., Morgan Stanley Investment Management, and UBS.

In October last year, Charles Schwab debuted a new alternative investments marketplace for the RIAs that custody with the company. Schwab’s marketplace, which hosts third-party platforms, waives costs that typically come with the asset class such as custody fees, a $250 annual fee, and all $25 charges for capital call processing. To start, the only third-party platform available in the new marketplace was iCapital Network.

Many RIAs already allocate money to alternative investments and others are interested in using the asset class as a means to differentiate their business, Jalina Kerr, senior vice president of Client Experience at Schwab Advisor Services, told RIA Intel at the time.

But only 45% of advisors allocate any client money to alternative investments and advisors who do might not be allocating enough. Alongside private equity and hedge funds, even a compelling case can be made for art as an investment. The wealthiest private investors often allocate 40% of their investable assets or more to alternative investments. 

Calcano believes more investors should consider the asset class and iCapital is trying its best to be “the world’s” marketplace for them; a place as ubiquitous with buying and selling investments as the NYSE, he said. 

The executive wants to make investing in alternatives "almost as easy as investing in a mutual fund.”