Picking up on the latest trend in asset management at banks, Wells Fargo & Co. has set up a stand-alone investment boutique for institutional clients.
The San Francisco-based banking company announced last week that its new registered investment adviser, Wells Capital Management, is set aside from the bank's operations.
The subsidiary, which represents $38 billion of the $54 billion in assets Wells manages, will manage accounts, mutual funds, and collective investment funds for institutional clients. The unit will also subadvise the bank's Stagecoach Funds and private client accounts on a limited basis.
The change resulted from the bank's merger last year with First Interstate Bancorp, which almost doubled the size of its entire asset- management business. Yet institutions made up the largest piece of First Interstate's investment client base; it managed $18.7 billion in discretionary trust assets, primarily in institutional retirement accounts.
"We had sufficient size, so we decided to segment private banking activities from our institutional money management business and not do them under one umbrella," said Robert Bissell, chief executive officer of Wells Capital.
Mr. Bissell said Wells Capital is designed for institutional investors "to make it very clear to clients and potential clients that our pure, sole function is to manage money for their marketplace."
Wells took its cue from other banks. NationsBank Corp. established a separate institutional investment firm, TradeStreet Associates Inc., in November 1995.
A month after TradeStreet opened its doors, Chase Manhattan Corp. launched Chase Asset Management Inc.
Institutional investors prefer independent money managers over those controlled by banks. By reporting their profits and losses separately from their bank parents, the new-styled bank money managers more strongly resemble the independents.
Wells took a big step out of the institutional investment management ring in June 1995, when, with Nikko Securities Co. Ltd., it agreed to sell joint venture Wells Fargo Nikko Investment Advisors to London's Barclays PLC. That firm, now known as Barclays Global Advisors, manages $350 billion.
At the time of the sale, Wells Fargo Nikko-a passive investor, or one that seeks to match or better various market indexes-had $171 billion under management. Wells now sticks to an active style of investment management, in which securities are analyzed on a bottom-up or individual basis.
"Passive index products have become a large player game," Mr. Bissell said. "The active investment management business is a very profitable one- one that fits Wells Fargo's corporate objective."