REDWOOD CITY, Calif., Feb. 22, 2018 /PRNewswire/ -- Today, Wealthfront launched Risk Parity, the latest addition to PassivePlusⓇ, the company's suite of rules-based investment strategies that aim to deliver clients higher after tax returns, net of fee. Risk Parity joins Wealthfront's previous PassivePlus features, daily tax-loss harvesting, stock-level tax-loss harvesting and Smart Beta as impactful capabilities.
"Wealthfront's PassivePlus marries decades of academic insights with technology to deliver a disciplined investment approach that helps our clients achieve their financial goals," said Dr. Jakub Jurek, Wealthfront's Vice President of Research. "Our launch of Risk Parity demonstrates that even the most sophisticated strategies can be deployed via software in a cost-effective manner."
Bridgewater Associates built the world's largest hedge fund, aided by its creation of the risk parity strategy in its All Weather Fund, which launched in 1996. The strategy gained momentum based on its strong relative performance during the 2008 financial crisis. But the firm's account minimum of $100 million limited the availability of its risk parity strategy to the ultra-wealthy and institutional investors. True to form, Wealthfront's PhDs and engineers developed a software-based approach designed to replicate Bridgewater's risk parity strategy, while keeping costs to the investor as low as possible.
"Most academics appreciate the benefits that broad diversification can bring, yet time and time again most investors fail to take advantage of the full benefit," said Dr. Burton Malkiel, Wealthfront's Chief Investment Officer and renowned economist. "The addition of Risk Parity takes diversification to the next level with a cost-effective, rules-based strategy. It aims to offer our clients more consistent returns during uncertain economic times1. I am proud we've been able to offer it at a low cost to our clients."
Wealthfront is proud to be the only automated advisor to offer comprehensive financial planning, its unique suite of PassivePlus® investment features and banking-related services all through the convenience of a mobile app. This announcement comes on the heels of Wealthfront's recent $75 million capital raise, bringing in Tiger Global Management as a new lead investor and the addition to home planning for Path. Wealthfront doubled its assets under management in 2017 and currently manages over $10 billion.
1 Black, Jensen and Scholes (1972) shows that low (high) beta stocks outperform (underperform) the general market on a risk-adjusted basis, suggesting that leveraged exposure to low beta stocks have the potential to outperform investing in high beta stocks. Risk Parity is based on a similar idea but applied across asset classes.
The Wealthfront Risk Parity Fund is managed by WFAS LLC, a SEC registered investment adviser and a wholly owned subsidiary of Wealthfront Inc. Northern Lights Distributors, LLC, a member of FINRA and SIPC, serves as the principal distributor for the Fund. Northern Lights Distributors, LLC is not affiliated with WFAS LLC or Wealthfront, Inc.
Before investing in the Wealthfront Risk Parity Fund, you should carefully consider the Fund's investment objectives, risks, fees and expenses. This and other information can be found in the Fund's prospectus. Please read the fund prospectus or summary prospectus carefully before investing. Investing in securities and mutual funds involves the risk of loss.
Investments in the Wealthfront Risk Parity Fund (the “Fund”) involve risk including possible loss of principal. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. The Adviser's assessment regarding the risk and correlation of the various asset classes and the Fund's exposure to leverage through the use of derivatives may prove to be incorrect and may not produce the desired results. Financial leverage will magnify, sometimes significantly, the Fund’s exposure to any increase or decrease in prices associated with a particular reference asset resulting in increased volatility in the value of the Fund’s portfolio. While such financial leverage has the potential to produce greater gains, it also may result in greater losses, which in some cases may cause the Fund to liquidate other portfolio investments at a loss to comply with limits on leverage and asset segregation requirements imposed by regulations or to meet redemption requests. The net asset value of the Fund while employing leverage will be more volatile and sensitive to market movements. The Fund’s investments in total return swap agreements also involves the risk that the party with whom the Fund has entered into the total return swap agreements will default on its obligation to pay the Fund. The Fund’s use of derivatives may cause the Fund to realize higher amounts of short-term capital gains than if the Fund had not used such instruments. Overall equity market risk, including volatility, may affect the value of individual instruments in which the Fund invests. In addition, the Adviser relies heavily on models and information and data supplied by third parties (“Models and Data”). Models and Data are used to construct sets of transactions and investments and to provide risk management insights. The Fund may be exposed to additional risks when Models and Data prove to be incorrect or incomplete. The Adviser is also newly established and has not previously managed a mutual fund. The Fund is not suitable for all investors. The Fund should be utilized only by investors who (a) understand the risks associated with the use of derivatives, (b) are willing to assume a high degree of risk, and (c) intend to actively monitor and manage their investments in the Fund. Investors who do not meet these criteria should not buy the Fund. An investment in the fund is not a complete investment program.
PassivePlus® is a registered trademark and property of CSSC Investment Advisory Services, Inc. ("CSSC") and is used under license. CSSC and Wealthfront are not affiliated companies.
Financial advisory services are offered by Wealthfront, Inc., a SEC-registered investment advisor. Brokerage products and services are offered by Wealthfront Brokerage Corporation, member FINRA / SIPC, and a wholly-owned subsidiary of Wealthfront, Inc. Please see our Full Disclosure for important details.