Merrill Lynch's owner finally invests in iCapital but at the non-early bird special share price

Merrill Lynch's parent now owns an expensive but influential sliver of iCapital after one congenial meal between the two CEOs kicked it off.

The Bank of America was granted its own private financing round, albeit at a $6 billion valuation in a rough market -- the highest price any investor has paid along with Apollo Global and others in the last December round. See: After RIAs finally board the alts train, holdout Apollo Global lavishes two big alts players with $6-billion and $1-billion valuations, respectively; thank COVID, one CEO says

It was a case of the big Charlotte, N.C., bank coming to the small but promising alternative investment platform as a buyer after previously coming as a seller of its alts feeder machinery.

"They said, 'We'd like to be part of your cap table,'" says iCapital CEO Lawrence Calcano.

"Andy Sieg and I had lunch and we had a great conversation."

As part of the agreement BoA won't reveal how much [or little] of the "cap table" it now owns. Generally, iCapital investors have disclosed the size of their rounds, if not their own portions of those rounds.

The total raised is $729 million, according to Crunchbase.

Virtually all the big players on Wall Street own a stake in iCapital.

Sieg is president of Merrill Wealth Management and a member of Bank of America Corporation’s executive management team.

More involvement

Sieg's deepening of ties with the iCapital product supermarket comes right after Merrill broadened Sieg's duties in January to include oversight of Merrill's Investment Solutions Group, which promotes packaged and alternative investment products. 

Merrill Lynch has 25,000 employees and $3.3 trillion of assets under administration. iCapital has 800 staff and recorded $135 billion of AUA, including $32 billion from overseas.

Though iCapital and Merrill Lynch already do business together, Calcano expects Merrill Lynch brokers to become much more involved over time.

"It's a multi-billion relationship and we have a lot of additional opportunities [to derive revenues]," he says.

In March 2019, iCapital acquired Bank of America’s alternative investment feeder fund operations. This enabled Bank of America to streamline and automate ongoing fund operations and administration services for Merrill and Private Bank advisors and their clients.

Diversifying portfolios

Now iCapital is trying to bring a greater portion of Merrill's platform assets through a full process of: investor education, providing a large inventory (currently 1,035 funds), purchasing products and then reporting on them.

“iCapital and Bank of America share the belief that alternative investments are an important component of a well-diversified portfolio and it is critical to increase access, education and service to advisors and their clients,” said Nancy Fahmy, Bank of America's head of alternative investments, specialty asset management and investment solutions specialists.

Fahmy also now serves on the iCapital observer board.

Since it did its initial deal with BoA, iCapital has developed the capabilities that made the bank take a second look, according to the release.

"Since the initial agreement with Bank of America, iCapital has made a series of acquisitions and launches to expand its technical capabilities, broaden the menu of investment opportunities offered on its platform, and continue to lead the industry in developing solutions to overcome barriers to efficiency and adoption," it reads.