Wells Fargo & Co. (WFC), the largest U.S. bank by market value, agreed to sell a majority interest in Overland Advisors LLC as the lender responds to new federal rules limiting banks’ ownership of hedge funds.
The stake will be sold to a new company controlled by Gordy Holterman, Overland’s chief executive officer, and Derek Dunn, the chief investment officer, Overland said in a Feb. 22 memo to investors and obtained by Bloomberg News. The San Francisco- based bank will keep a minority interest in the $2.2 billion fund, according to the memo. Terms weren’t disclosed.
“This transaction, in conjunction with the growth of Overland’s external client base over the past two years and strong record of performance, will benefit Overland clients as it better positions Overland for ongoing success as an alternative asset-management firm,” according to the memo.
Wells Fargo, responding to rules that seek to curb risk-taking by banks, created Overland in January 2010 from a proprietary-trading group that had managed about $4.3 billion of the company’s capital. The sale is intended to simplify the ownership structure and make it easier to attract outside investors, according to a person familiar with the agreement who requested anonymity because the details are private.
Laura Fay, a Wells Fargo spokeswoman, confirmed the changes in ownership and declined to comment further.
Wells Fargo is gradually drawing down its funds by not replacing assets when they mature, and has said it expects to complete the process in 2014. The company has more than $1.6 billion invested in Overland and held in a separate account, while outside investors account for $520 million, according to the person.
Overland, which manages Cayman Islands-based Overland Relative Value Fund Ltd., is seeking consent for the transaction from a majority of unaffiliated investors, according to the memo. Overland said it expects the transaction to close on or about April 1.
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