Goldman Sachs details plans for liquid alts, 'smart beta' ETFs

New filings by the liquid alts mutual fund manager offer details for its long-anticipated ETF debut.
DEC 17, 2014
Goldman Sachs has further detailed its plans for the fast-growing ETF market, filing documents to offer 11 specialty and alternatives funds. Late last week the fund company filed preliminary prospectuses with the Securities and Exchange Commission for funds that try to emulate hedge fund-style strategies like equity long-short and event driven. The firm is also planning funds with the brand name “ActiveBeta,” which attempt to outperform market-cap-weighted market indexes. The funds deviate from the methodology of allocating to securities based on their size as traditional indexes do, instead preferring factors like low volatility. While they rely on rules-based indexes in making security selection, many see them as “active” management because they deviate from traditional indexes such as the S&P 500 or the Russell 2000. Those funds are often called, controversially, “smart” or “strategic” beta. And they've been capturing a lot of the recent growth in the ETF market, about one of every $5 U.S. investors put into ETFs. Meanwhile, hedge-fund-style strategies have also been gaining steam in retail wealth management since the 2008-2009 financial crisis as advisers looked to tamp down the risks in stock and bond markets. Mostly in the form of mutual funds, so-called “liquid alts” have been growing at eye-popping rates. Alternatives mutual funds and ETFs held nearly $206 billion in the U.S. as of Sept. 30, up an eye-popping 764% from $24 billion a decade ago, according to Morningstar Inc. The funds drive higher revenue to managers than traditional mutual funds, increasing the value of success in that marketplace. Goldman's hedge-inspired ETFs would be index-based funds-of-funds, not actively managed, tracking an index that attempts to replicate the performance of exotic strategies that ostensibly would not be correlated to the returns of the broad market. Goldman has filed several applications that need approval from securities regulators in order to offer the funds. The filings are preliminary, and Goldman Sachs is under no obligation to issue the ETFs even if it receives approval from the SEC. But the new filings could indicate progress toward approval and they provide the most detailed snapshot yet of how Goldman — a money manager with a slew of “liquid alts” and more than $100 billion in mutual funds altogether — plans to build out a business in the fast growing, $2 trillion market for ETFs. The fund company offers two exchange-traded notes, a cousin of ETFs, but has not yet been allowed by regulators to manage its own ETFs.

Latest News

RIA dealmaking accelerates as three firms hit AUM milestones
RIA dealmaking accelerates as three firms hit AUM milestones

Wealth Consulting Group, Coastline and Maridea report fresh capital, acquisitions and asset growth as advisor M&A keeps climbing

VastAdvisor closes $1 million SAFE round from advisor-side backers
VastAdvisor closes $1 million SAFE round from advisor-side backers

Carson Group's Dani Fava, Jason Pereira of Woodgate Financial, and Sally George of Convergency Partners led the raise as the growth-tech startup builds out its AI platform and leadership bench.

Wells Fargo adds three advisor practices as recruiting rebound continues
Wells Fargo adds three advisor practices as recruiting rebound continues

New teams from William Blair, Ameriprise and UBS bring more than $560 million in combined client assets to the firm's employee and independent channels.

UBS will pay advisors 'handsomely' for banking starting next year
UBS will pay advisors 'handsomely' for banking starting next year

Regulators this year approved UBS Bank USA’s conversion to a nationally chartered bank.

SEC accuses Tricolor executives of hiding $800 million collateral hole
SEC accuses Tricolor executives of hiding $800 million collateral hole

How a subprime lender’s car-loan bonds allegedly unraveled before bankruptcy.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income