Wealthfront, an automated advice platform, filed Wednesday with the Securities and Exchange Commission to introduce its first mutual fund, the Wealthfront Risk Parity Fund. The robo advisor is launching the fund through Two Roads Shared Trust, a shared mutual fund trust aimed at advisors, such as hedge fund managers, who wish to start alternative mutual funds.
According to the prospectus, total annual fund operating expenses will be 0.51 percent, including a 50 basis point management fee and 1 basis point for other expenses. There will be no 12b-1 fees.
The fund will use derivative instruments, such as total return swaps, to get exposure to global developed and emerging market equities, global developed and emerging markets fixed income, real estate investment trusts and commodities.
It will target an annualized volatility of 12 percent, although its actual volatility level may be higher or lower than the target depending on market conditions, the filing said.
The portfolio managers will seek equal risk exposures from the underlying asset classes.
“Based on the Adviser’s assessment of the Fund’s portfolio risk as well as the prevailing market conditions (such as market volatility), the Adviser will use leverage (through investments in derivative instruments such as total returns swaps) to adjust or to increase the Fund’s exposure to certain asset classes in order to seek higher returns than traditional portfolios at similar risk level, or lower risk at similar return levels,” the prospectus stated.
It will be managed by Jakub Jurek, Wealthfront’s vice president of research, and Celine Sun, the company’s director of research.
Direct investors must invest a minimum of $5 million to get into the fund, while Wealthfront advisory clients with a certain minimum account balance have no minimums. Advisor-directed investors are also subject to a minimum initial investment of $5 million.
