Wells Fargo Funds officially became the Allspring Funds yesterday. A release entitled, "Allspring Global Investments Commences Operations As An Independent Global Asset Manager," explains, "Allspring Global Investments today announced that the firm has officially commenced operations as an independent asset management firm. This marks the close of the previously announced acquisition of Wells Fargo Asset Management by GTCR LLC and Reverence Capital Partners, L.P. The firm's new name, Allspring Global Investments (Allspring), takes effect today." (See our Oct. 14 Link of the Day, "Wells Fargo Funds Change to Allspring," and see the latest fund filing here.)
The release tells us, "Allspring Global Investments is a leading, pure play, independent asset manager with more than $587 billion in assets under management and a full breadth of investment capabilities across diverse asset classes, serving the needs of its institutional and wealth management clients around the world. Allspring operates across 18 offices globally and plans to locate its headquarters in Charlotte, North Carolina." The new Allspring manages $194.7 billion in money market funds, making it the 9th largest MMF manager.
Joseph A. Sullivan, Executive Chair and CEO of Allspring, comments, "We recognize that investor expectations in today's world go beyond simply delivering alpha. Our commitment will be a continued focus on providing exceptional value to clients by elevating our investment platform and operating model. With the strong support of our partners, GTCR and Reverence Capital, we are poised to capitalize on the many current opportunities before us and we see tremendous potential to expand our reach into new markets and capabilities."
Collin Roche, Co-CEO and Managing Director of GTCR, and Milton Berlinski, Co-Founder and Managing Partner of Reverence Capital, jointly state, "This is a historic day for Allspring. Independence provides the organization with a unique opportunity to expand its leadership position in the asset management industry. We have great confidence in Joe Sullivan and the entire leadership team as they differentiate Allspring in the marketplace by ensuring that the firm is an essential partner to its private wealth and institutional clients. We will be investing significantly in the business to grow strategic areas, including the technology platform, the distribution network, and the firm's international footprint."
Sullivan adds, "Today, we especially want to celebrate the more than 1,400 incredibly talented people of Allspring. They are core to our collaborative culture, and Allspring's independence will be a catalyst to provide exceptional growth opportunities as we chart our path forward.... The entire organization is energized and confident about Allspring's future, and our teams are ready to deliver even more for our clients."
The release also says, "In addition to GTCR and Reverence Capital's majority ownership, Allspring's management, portfolio managers, and employees now hold a significant share of the company's equity interests, while Wells Fargo & Co. will own a passive 9.9% equity interest and continue to serve as an important client and distribution partner to Allspring. Broadhaven Capital Partners and UBS Investment Bank served as financial advisors to the buyers relative to the transaction, with additional financial advice rendered by RBC Capital Markets and Perella Weinberg Partners. Kirkland & Ellis LLP provided legal counsel."
See also our July 27 News, "Wells Fargo Asset Mgmt. To Be Renamed Allspring Global Investments (and their release) and see our Feb. 25 News, "Wells Fargo Sells Asset Management Unit; Morgan Stanley Gets Social," and the original press release, "Wells Fargo Enters Agreement with GTCR and Reverence Capital Partners to Sell Wells Fargo Asset Management."
In other news, Fitch Ratings published a brief, "U.S. Debt Ceiling Uncertainty Disrupts MMF Portfolio Management." They write, "Money market funds (MMFs) lowered exposures to U.S. Treasury securities maturing around the initial Treasury debt ceiling 'X-date' to reduce headline and liquidity risk from potential default. The date was predicted to be Oct. 18 by the U.S. Treasury Secretary, and mid-October to early-November by market participants."
The piece explains, "The biggest net decrease was for Treasury securities maturing on Oct. 28, where 28 MMFs sold $14 billion between Aug. 31 and Sept. 30, 2021. MMFs and other investors selling out of these securities caused the yield to spike to 0.13% on Oct. 5 from 0.049% on Sept. 27. Selling may have also been driven by funds' normal liquidity management, where short-dated Treasuries are sold to meet redemptions."
Fitch tells us, "The extension of the debt ceiling deadline helped calm markets, but is challenging funds that attempted to de-risk portfolios. The U.S. Senate voted to raise the borrowing limit by $480 billion on Oct. 7, which moved the expected X-date to Dec. 3, 2021. After the announcement, yields for Treasury securities maturing on Dec. 7 jumped from 0.038% to 0.081%, and yields on sensitive October Treasuries fell.... MMFs that sold October Treasuries and bought December securities to reduce their debt ceiling-related risk may have been adversely affected by the trade, and now find themselves in the same position as before the date was moved."
They say, "For example, between July and September 2021, one large Treasury-only fund sold $8 billion of Treasuries maturing in October and November, and bought $8 billion in securities maturing on now-sensitive dates in December. The political nature of the debt ceiling issue challenges funds' ability to immunize their portfolios from the associated risks."
Finally, Fitch comments, "A default by the U.S. Treasury on any security held by MMFs could pose a liquidity risk for the funds. Fitch would not necessarily immediately downgrade an MMF holding a defaulted Treasury security, but our analysis would focus on the size of the exposure and on what other sources of liquidity a fund might have."
They add, "Treasury MMFs are generally considered the safest by investors, although these funds face the most risk in the case of the debt ceiling, since prime and government MMFs can invest in other instruments. Treasury-only MMFs have very limited options, and tend to spread investments across Treasury maturities or leave cash with their custodians to ensure liquidity, as funds could face investor redemptions as the debt ceiling deadline approaches."
