Wells Fargo’s First ETF Will Likely Be A Multifactor Robot Fund

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December 19, 2016 9:12am NYSE:WFC

NYSE:WFC | News, Ratings, and Charts

Banking giant Wells Fargo & Co (NYSE:WFC) is joining its biggest rivals and will finally launch its first-ever ETF next year, and the fund will likely be of the new-age multifactor smart beta variety.

Investors can expect the fund to launch some time in the first half of 2017. From Bloomberg:

The San Francisco-based bank’s fund unit is considering launching its first ETF within three to six months, company executives said. Following the success of giants that went before, Wells is beefing up its quant credentials as it prepares to compete for a chunk of the $4.1 trillion ETF pie.

Back in October, Wells Fargo acquired a small quant specialist called Analytic Investors LLC, and it’s likely planning to fold that firm’s automated investing strategies into its first exchange traded fund offering. Smart beta and multifactor funds are all the rage these days, since they tend to replicate the traditional active management style — getting in and out of multiple asset classes — without any actual human intervention.

“We believe it’s a good time to take a look at things like low volatility, investing factor-based ETFs that are not so dependent on market-weighted stocks,” said Kirk Hartman, global chief investment officer of Wells Fargo Asset Management. “Multifactors, to me, that’s the key to success.”

Other factors the bank is considering include risk parity and volatility, according to sources. The true test, as is always the case, will be if the new fund can gather enough assets to be viable. Considering its massive customer base, Wells Fargo shouldn’t have too many problems on that front.

But when it comes to performance, many of these advanced funds still trail major indexes, which have marched relentlessly higher every year since the financial crisis ended.

Wells Fargo shares fell $0.14 (-0.25%) to $55.20 in premarket trading Monday. Year-to-date, WFC has gained 1.8%, versus a 10.38% rise in the benchmark S&P 500 index during the same period.


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