Yahoo Finance BofA to Divest Alternative Investment Feeder Funds Business
In an effort to further simplify operations, Bank of America BAC announced that it will divest its businesses that manage alternative investment feeder funds to a financial-technology firm, iCapital Network. The financial terms of the deal, expected to close in first half 2019, has not been disclosed.
This business, which collects client money to invest in hedge funds and private equity, manages nearly $20 billion in client holdings.
Nancy Fahmy, head of alternative investments and specialty asset management at BofA said, “Partnering with them will allow us to do what we do in a more efficient way. We view iCapital as a leading partner in this space, really providing the infrastructure and architecture across the AI industry.”
As part of the deal terms, BofA will continue to source, distribute and monitor these feeder funds and also provide constant “guidance on the role of investments within a diversified investment strategy” to iCapital. Further, investors will remain clients of Merrill Lynch and U.S. Trust units. Additionally, iCapital will offer positions to 22 BofA staff members who at present support feeder fund operations businesses.
Per Fahmy, BofA begun evaluating the business for divestiture nearly a year ago and after thorough due diligence iCapital was selected.
For iCapital, the deal further strengthens its relationship with Wall Street. Last year, it had acquired a U.S. private equity access fund platform from Deutsche Bank AG’s DB asset manager. Further, the firm has partnered JPMorgan JPM and a few other financial entities over the years.
Over the years, BofA has undertaken several such divestiture measures to focus on its core operations, improve efficiency and strengthen balance sheet. These have resulted in significant cost savings for the bank.
Shares of BofA have gained 2.4% so far this year against 1.3% decline for the industry it belongs to.
Currently, BofA carries a Zacks Rank #3 (Hold).
A better-ranked major bank is Comerica Incorporated CMA. The bank’s Zacks Consensus Estimate for earnings has moved nearly 1% upward over the past 60 days. This Zacks #2 Ranked (Buy) company’s shares have rallied 6.5% so far this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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