Private equity firms GTCR and Reverence Capital Partners have tapped former chairman and CEO of Legg Mason Joseph Sullivan as CEO of Wells Fargo Asset Management.
The asset manager, which has $604 billion in assets, will also get a new brand under its private equity owners: Allspring Global Investments.
Both changes will become effective once the deal to buy WFAM from Wells Fargo closes, which is expected in the second half of the year. Sullivan will continue as executive chairman of WFAM, a post he took on when the deal was announced.
Sullivan, who joined Legg Mason in 2008, oversaw the firm from 2012 until it was sold to Franklin Templeton. It was a time of turbulence for the firm, including multiple years of outflows. Sullivan, who was head of global distribution and chief administrative officer before becoming CEO of Legg Mason, will succeed Nico Marais, who will become an advisor to Allspring Global. Marais joined WFAM from Schroders in 2017 and became CEO in 2019.
“Any deal of this magnitude serves as a catalyst for change,” Sullivan told Institutional Investor. “There’s a tremendous amount of change underway in this industry. And yet within firms, driving change is always very hard. There is just so much resistance to it. People are afraid of it, or people preserve what is the status quo and what they’re comfortable with at the very time when the industry is demanding that you change and evolve.”
GTCR and Reverence Capital said in February that they would acquire WFAM from Wells Fargo Bank. Wells Fargo will retain a 10 percent stake.
As an independent asset manager, Allspring Global Investments is shedding the Wells Fargo name of its parent bank. Wells Fargo has been involved in a number of high-profile scandals over the years, none of which involved the asset manager.
Nonetheless, the scandals hurt WFAM’s brand as portfolio managers faced questions from clients and some pension funds and others were required to put strategies on watch lists and do additional due diligence for boards. In addition to distancing itself from Wells Fargo, becoming a standalone asset manager will free up staff from time-consuming regulatory and other tasks required when having a bank parent.
“[We’re not] having to be distracted by things that are driven by the bank. That’s going to create such a meaningful productivity lift,” said Sullivan. “I want to be clear about this. We’ve had great ownership in Wells Fargo over the years. They’ve helped us to be better, but in the last few years, the branding issues have been a bit of a challenge. We’re going to take some of those headwinds and we’re going to turn those overnight into tailwinds.”
As one example, Sullivan said the firm can be a more effective partner for the bank because it will be operating separately. In the U.S. retail space, some intermediary platforms have viewed the bank-owned asset manager as a competitor. Wells Fargo also has advisors. “They say, ‘so why are we supporting a competitor?’ That goes away,” he said.
Sullivan said the manager has been underinvested while part of the bank. GTCR and Reverence plan to change that. They’ve said they will invest more than $100 million into the asset manager.
Part of that money will go into technology and hiring distribution staff and resources. Despite WFAM’s size, it’s got a modest profile in the industry.
“We have really good people in distribution. We just need more of them; that’s in the U.S., but also internationally, in retail, and institutional,” said Sullivan.
WFAM's strategies have been consistent performers over long periods. Sullivan said “no one thinks we’ve achieved our fair share of market share. Part of that is that we’ve been resource constrained. [But] as we build distribution, we think we should be able to capture meaningful more market share than we have today.”
Down the road, Sullivan anticipates making some targeted acquisitions in areas beyond its core, possibly including private equity, real estate, infrastructure, and exchange-traded funds.
“I would expect we will be open to what I would call capability-accretive M&A,” Sullivan said. “They don’t have to be gargantuan deals. They can be teams; they can be small boutiques that add to our capabilities. We have a very good vehicle lineup, but I think we could do more in ETFs.”
“This is the best asset manager that know nobody really knows much about,” he added. “I think that’s going to change.”