Bloomberg News

Wells Fargo Sells Majority Stake in Overland Advisors Hedge Fund

February 27, 2012

Wells Fargo & Co. (WFC), the largest U.S. lender by market value, agreed to sell a majority interest in Overland Advisors LLC to speed the hedge fund’s independence.

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 sent 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.

Wells Fargo created Overland in January 2010 when it decided to segregate from the bank 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, said Laura Fay, a Wells Fargo spokeswoman.

“The change in ownership is not driven by regulatory changes or requirements,” Fay said in a phone interview. “It is simply a realignment of ownership interests that is consistent with industry standards and client expectations.”

Wells Fargo, responding to rules that seek to curb risk- taking by banks, is gradually drawing down its capital 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, most of it in a separate account, while outside investors own about $520 million, according to a person familiar with the investments who requested anonymity because the details are private.

Relative Value Fund

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 be completed on or about April 1.

The Relative Value Fund gained about 3.6 percent in 2011, net of a 2 percent management fee and a 20 percent performance fee, Overland said in a fourth-quarter report to investors. The fund is up about 3 percent year-to-date, the person said.

Overland is part of Wells Fargo’s Asset Management Group, which oversees $450 billion and is run by Michael Niedermeyer. The firm employs about 16 people in the investment team and 27 total, according to a separate report.

The so-called Volcker rule, a provision of the Dodd-Frank Act that limits risk-taking, would prohibit banks from investing more than 3 percent of Tier 1 capital in hedge funds or private- equity funds.

To contact the reporters on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net.

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Christian Baumgaertel at cbaumgaertel@bloomberg.net.


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