The Wall Street giant is offering high-tier customers with at least $50 million in assets exclusive access to direct investment opportunities.
Bank of America Corp. will offer investments in private equity funds to its ultra-wealthy clients, a move that comes as more financial firms give access in alternative assets to a broader swath of millionaires.
The company’s Merrill wealth unit and Bank of America Private Bank created a new program with private-market investment opportunities that will be offered to customers with at least $50 million in assets, according to a statement Thursday. The first fund will be available next month to eligible clients.
“Differentiated access is becoming more and more critical,” Mark Sutterlin, head of alternative investments for Merrill and Bank of America Private Bank, said in an interview. “The idea of exclusivity and getting unique access is important to the ultra-high-net-worth cohort.”
Most of the funds offered through the program will be direct and open-ended investments without discreet time-periods, giving clients more flexibility around buying into or exiting their positions, Sutterlin said.
Private equity funds used to cater exclusively to institutions and ultra-wealthy clients able to analyze the risks of — and stomach the potential losses from — putting money into investments that span several years, through economic cycles. That shut out smaller investors looking for returns beyond those offered by the public markets.
Now, private equity companies are attracting clients with as little as $5 million in investable assets. For the biggest names in the field, such as Apollo Global Management Inc., Ares Management Corp., Blackstone Inc. and KKR & Co., the next cohort is those with $1 million to $5 million, a segment of US households that’s been growing.
The race for these so-called mini-millionaires has intensified as institutional investors such as pension funds and endowments, often over-allocated to private equity, have loosened their embrace of the firms amid high interest rates and economic uncertainty.
“One of the overall themes that we have been observing and leaning into is that we are seeing more of our advisers and investors lean into alternative investments across the board,” Sutterlin said.
As part of the new alternative-investments program, Bank of America will require its advisers to be trained on how the program differs from existing wealth offerings at the bank, Sutterlin said. Funds will then be offered through advisers to eligible clients, who can eventually gain access to data rooms and will be able to directly review the offerings and learn more about investment vehicles, he said.
Bank of America isn’t alone in its effort to increase access to alternative investments. Morgan Stanley launched its own private equity fund, which offers exposure to co-investments and secondaries in the lower middle market to investors with a few million dollars. Goldman Sachs Group Inc. made a similar move, with an open-ended private equity fund open to those with at least $5 million in investments across their portfolios.
Bank of America plans to add offerings in its own program, and the number of funds available each year will be based on client demand, Sutterlin said.
“It’s going to help continue the growth of alternate investments and improve our advisers’ competitive position” in the marketplace, he said.