Bank of America Makes Its First Investment in Alts Platform iCapital
iCapital’s CEO Lawrence Calcano told RIA Intel that the alternative investment giant has a runway of about $500 million in capital due to previous fundraising rounds and was not actively seeking the investment.
The alternative investments platform iCapital, used by more than 7,000 financial advisors, has raised an undisclosed round of funding from Bank of America, the company announced Thursday.
Bank of America invested in iCapital at a valuation of $6 billion, the same value as the company’s last round of funding in December 2021. During that round, iCapital raised $50 million from WestCap, an $8 billion growth equity firm; Temasek, Singapore’s roughly $282 billion state investment company; and Apollo Global Management, the $481 billion alternative investment firm in New York.
iCapital’s CEO Lawrence Calcano told RIA Intel that iCapital has almost $500 million of capital on its balance sheet due to previous fund-raising rounds, and that it was not actively seeking funds when Bank of America offered up the capital.
However, “iCapital was happy to include them in the cap table, given [that] they are an important strategic partner, and [we see] it as a valuable way to create even closer alignment,” Calcano said.
Nancy Fahmy, head of alternative investments at Bank of America, will join iCapital’s advisory board to help with product direction. No other terms of the deal were disclosed.
Since its founding in 2013, the alternatives giant has raised about $750 million, with more than $490 million raised last year.
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Strategic investors from previous rounds include BlackRock, Blackstone, BNY Mellon, The Carlyle Group, Citi Ventures, Credit Suisse, Goldman Sachs Asset Management, Golub Capital, Hamilton Lane, JPMorgan Chase, KKR, Morgan Stanley, UBS, and Wells Fargo.
iCapital said in a statement that it will use the investment from Bank of America to continue to build out the technical capabilities of its global alternative investing solution. The platform supports more than $130 billion in platform assets, a significant increase from the $68 billion on the platform at the beginning of 2021.
The investment marks a “milestone” in a strategic relationship between iCapital and Bank of America that dates back to 2018, when the companies began to negotiate a deal. In March 2019 they came to an agreement, and iCapital acquired Bank of America’s alternative investment feeder fund operations, which streamlined and automated Bank of America’s ongoing fund operations and administration services for Merrill and private bank advisors and their clients.
“iCapital and Bank of America share the belief that alternative investments are an important component of a well-diversified portfolio and [that] it is critical to increase access, education and service to advisors and their clients,” said Fahmy.
Since that time, iCapital has made 10 acquisitions and launches to expand its technical capabilities and broaden the menu of investment opportunities offered on its platform. (This year, iCapital acquired a private market feeder fund platform from Bank of Singapore, an alternative investment feeder fund platform from Stifel, and SIMON, a structured note provider.)
The company, which is headquartered in New York, has grown to more than 800 employees — 100 of which were added in 2022, primarily in tech roles — and also has offices in Hong Kong, Singapore, Lisbon, Toronto, London, and Zurich.
The high volume of investment in alternative platforms is not surprising, considering that global alternative assets under management are expected to increase by 60 percent and reach $17 trillion between the end of 2020 and the end of 2025, far outpacing global GDP and inflation rates, according to alternatives data and research firm Preqin. iCapital competitor CAIS, an alts platform used by more than 5,000 advisory firms and valued at $1.1 billion, has also raised more than $325 million from investors in 2022.
Dave Lowery, head of research insights at Preqin, told RIA Intel that the long-term appetite for alternatives remains strong and that any decreases in value due to rising interest rates, higher inflation, and market volatility represent a potential buying opportunity for investors.
In a recent survey of advisors, 83 percent already recommended that clients who meet the accredited investor requirements allocate to alternatives.
Correction: A previous version of this story misspelled Lawrence Calcano’s last name, it is Calcano not Calcan.
Holly Deaton (@HollyLDeaton) is a staff writer at RIA Intel and based in New York City