NEW YORK - Wells Fargo & Co., the most valuable U.S. bank, has agreed to purchase Merlin Securities, a prime brokerage that serves hedge funds and other clients with as much as $2 billion in assets.
The purchase is Wells Fargo's first foray into prime brokerage services, and the bank will use the business as a foundation to expand, said Christopher Bartlett, head of equity sales and trading at the San Francisco-based lender. Prime-brokerage includes services such as lending, clearing trades and record-keeping that help hedge fund managers run their firms. Bartlett wouldn't say how much Wells Fargo paid.
Chief Executive John Stumpf, 58, is expanding Wells Fargo's offerings for hedge funds and beefing up the equities trading business housed within the securities unit. The moves are part of a plan to bolster the investment bank it acquired when Wells Fargo rescued Wachovia Corp. during the 2008 financial crisis.
The latest deal gives Wells Fargo Merlin's open-architecture technology, which allows clients to aggregate their prime brokerage accounts in one place, as well as custody and clearing services and operational support, according to the statement. The business will be part of the securities unit, run by John Shrewsberry.
Merlin has about 500 clients including hedge funds, family offices and registered investment advisers and about 100 employees in offices in New York, San Francisco and Toronto. Managing partners Stephan Vermut and Aaron Vermut will join Wells Fargo, according to the statement.
Merlin clients, who currently have access to the custody services of J.P. Morgan Chase and Goldman Sachs, now will have Wells Fargo as another option with a strong credit rating, Bartlett said. Wells Fargo is rated A2 by Moody's Investors Service and AA-minus by Fitch Ratings.
Stumpf and his predecessor Dick Kovacevich built Wells Fargo into the fourth-largest U.S. bank by assets focusing on consumers and avoiding riskier trading and underwriting that felled some of the nation's biggest investment banks. Stumpf told investors in January he couldn't "care less" how his firm fares in the ranks of investment banking and capital markets, preferring to view such services as just another product to sell to business customers if they need it.
