Hard to See Why Anyone Would Buy This Fund

Seems that only a few years after their launch the robo advisors who advocated simple long term investing with stable portfolios managed with tax harvesting and rebalancing are doing exactly what they preached that investors not do..abandon the long term strategy and move into something else.

Betterment has launched its "indexing 2.0" which uses a proprietary model (no clear data presented) making use of smart beta strategy that it claims will deliver better than market risk adjusted returns. Seems that "hope springs eternal" and Betterment perhaps looking at the short term performance of their portfolios felt the need to offer something else. As I noted even if one were to incorporate a smart beta element to portfolios there are less expensive and more transparent ways to do it.

Wealthfront has gone even further announcing a mutual fund that is anything but a simple asset class low cost allocation From  Financial Planning

The firm filed with the SEC Wednesday for what it calls the Wealthfront Risk Parity Fund. The derivatives fund would invest in global developed and emerging market equities, global developed and emerging markets fixed income, real estate investment trusts and commodities.

It is true that the fund only has a management fee of .51% vs. the more common fees of hedge funds that use such strategies which are in the area of 2% management fee and 2% of the profits....

But even taking into account those fees, hedge funds have been terrible at beating simple index portfolios. Given Wealthfront's short tenure as a firm and zero experience in managing money..it's not clear to me whether the fact that the strategy is now available to investors with not minimum is a good thing. More likely they should take advantage of the price wars in ETFs where a straightforward well allocated portfolio can be constructed for less than .10%

Financial Planning adds:

The SEC filing notes that “the fund is not suitable for all investors,” but instead only for those “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.”

In other words after offering plain and simple as the best path to investors Wealthfront offers a mutual fund with no minimums that is anything but simple.