Wells Fargo & Co., the biggest U.S. bank by market value,bought a stake in Rock Creek Group LP to provide more hedge-fundofferings to clients amid a push to double the asset-managementunit within seven years.

The lender purchased a 35 percent stake in the Washington- basedfirm and has an option to make a controlling investment, WellsFargo asset-management chief Mike Niedermeyer said in an interview.Rock Creek oversees about $7 billion, giving clients access tohandpicked hedge funds and emerging markets, the bank said in astatement, which didn't disclose financial terms.

“We view this as one of the fastest-growing segments in theasset-management business,” said Niedermeyer, whose businessmanages $450 billion for customers at San Francisco- based WellsFargo. “While it's of a greater interest to larger clients, it'squickly becoming a larger area of focus for middle-size and smallerendowments, and state pension funds.”

Chief Executive Officer John Stumpf, 59, has sought to expandbusinesses that are less likely to be hampered by new globalbanking regulations and record-low interest rates. In April, WellsFargo announced it would buy Merlin Securities LLC, a primebrokerage that caters to hedge funds and other clients with as muchas $2 billion in assets.

Rock Creek, in addition to picking hedge-fund managers, also hastools that allow clients to analyze portfolios and stress-testinvestments, Niedermeyer said. The firm has about 50 employees andis run by Afsaneh Mashayekhi Beschloss, a former World Bank chiefinvestment officer.

Investment Managers

Wells Fargo made the investment through a unit within assetmanagement that groups together boutique investment managers andlets them remain mostly independent, according to the statement.The unit is run by Tom Hoops.

In 2010, Rock Creek received $200 million to invest for the NewYork state pension fund, the third-largest in the U.S. at the time.The firm lost money for New Jersey's pension system in 2006 with aninvestment in Amaranth Advisors LLC, a hedge fund that implodedwith wrong-way bets on natural gas.

Beschloss, who is married to presidential historian MichaelBeschloss, and other Rock Creek employees will continue to own 65percent of the firm. She left the World Bank in 2001 after managing$65 billion in assets and $160 billion in notional derivativesexposure, according to the statement.

While all of Rock Creek's clients are qualified institutionalinvestors, Wells Fargo eventually may seek to make its strategiesavailable to retail investors, Niedermeyer said.

Asset management caters to institutional clients such aspensions and endowments, sovereign-wealth funds and companies. Italso offers mutual funds for retail investors and is separate fromthe bank's wealth-management unit, which houses Wells Fargo'sretail brokerage and manages funds for individuals.

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.