ICapital Network, a fintech that automates alternative investing processes, announced it will acquire Wells Fargo’s Global Alternative Investments’ (GAI) feeder fund platform. Although the terms of the deal were not disclosed, iCapital expects to complete the deal during the second half of 2020.

“Buying and selling equities, and buying and selling fixed-income products is super automated. Alternative investing is not automated at all,” said Lawrence Calcano, chairman and chief executive of iCapital. “It’s just been a highly manual process. We’re bringing automation to this process that is completely manual.”

Yesterday’s deal marks seven-year-old iCapital’s fifth acquisition of a bank alternative investing platform after previously acquiring the Credit Suisse, Bank of America Merrill Lynch, Deutsche Bank and Morgan Stanley platforms for undisclosed amounts. With the acquisitions, iCapital is helping banks scale the automation of their alternative investing business, including private equity, private debt, hedge funds and private real estate. 

ICapital’s clients include banks, investment management firms and advisers. The company’s technology automates the documentation required for alternative investing, and manages the cash distributions that occur over the course of years with such transactions. An investor, for example, who commits to $100,000 during a five-year period would need to send a portion of the commitment at regular increments; iCapital automates these largely manual processes.

The company announced last month that it is acquiring Artivest’s platform and operating business for an undisclosed amount. Once the Artivest and Wells Fargo deals close, iCapital will service almost $58 billion in client assets across more than 720 funds.  

With the acquisition of Wells Fargo’s GAI feeder fund platform, iCapital will now manage the interactions on the platform. According to iCapital, its technology automates alerts, aggregates sales reporting and integrates data into existing systems. The big bank, however, will still make all the due diligence decisions regarding the investments. Calcano said that banks outsourcing their platforms to iCapital doesn’t represent an exit from the alternative investing business, but rather a commitment to scaling the business through iCapital’s automation technology.

“We are pleased to partner with iCapital to deliver alternative investments to enhance the experience for our advisors and clients,” said Darrell Cronk, president of Wells Fargo Investment Institute, in a statement. “This transaction will allow us to continue to provide innovative alternative investment solutions to our clients as well as upgrade the overall platform and launch new offerings.”

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As part of the acquisition, Wells Fargo is also making an investment in iCapital, which raised $146 million last year. Its list of investors includes Goldman Sachs, JPMorgan Chase & Co., UBS Financial Services and BlackRock. The company generates revenue from fees charged to partner institutions.

According to a sponsored report from the investment management company SEI, the COVID-19 pandemic could have an affect on institutional investors’ appetite for alternative investing. “In the pre-Covid-19 world, institutional investors’ penchant for alternative investments showed no signs of slackening,” the report said. “While the pandemic hasn’t necessarily affected that fervor, it has seen some investment boards clicking pause on alternative allocations.”

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