USAA Potential ETF Debut Puts a Dent in Goldman's Plans

USAA Capital Corp. has been an early adopter of multi-factor exchange traded funds, such as those under Goldman Sachs Group’s wing, but now, the financial planning firm is seeking to wade its own toes into the smart beta ETF space.

As of its last filing, USAA held over $513 million in Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC), Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM), Goldman Sachs ActiveBeta International Equity ETF (GSIE) – USAA is the only larger buyer of Goldman’s ETFs, other than Goldman itself, reports Dani Burger for Bloomberg. To put this in perspective, Goldman Sachs Asset Management ETFs have $5.93 billion in assets under management.

However, USAA could be making a major shift as the insurance and financial planning firm has filed with the Securities and Exchange Commission to launch its own line of multi-factor ETFs, including the USAA MSCI USA Value Momentum Blend Index ETF (ULVM), USAA MSCI USA Small Cap Value Momentum Blend Index ETF (USVM), USAA MSCI International Value Momentum Blend Index ETF (UIVM) and USAA MSCI Emerging Markets Value Momentum Blend Index ETF (UEVM).

The four filed USAA ETF strategies blend momentum, which tracks the markets top performing picks, with value, which tries to focus on cheaply priced stocks relative to assets. By combining the two strategies, USAA’s multi-factor ETFs could help balance the shortfall between momentum and value.

“The gap is that USAA doesn’t offer ETFs,” Lance Humphrey, executive director of global multi-assets at USAA Asset Management, told Bloomberg. “This will be filling that gap with a brand that our members trust.”

Many new providers and smart beta ETFs have had a hard time attracting investment interest, with many falling short of the $50 billion threshold needed to turn a profit and attract larger brokerages. However, some, like Goldman, have leveraged their own in-house assets to help fill the gap and bring more prominence to the smart beta strategies.