Goldman Pushing Into Smart Beta and Liquid Alts ETF Business

Earlier this year, Goldman Sachs was rumored to be looking at purchasing IndexIQ to make a move into the market for liquid alternative ETFs, however, with IndexIQ being purchased by New York Life, Goldman has decided to file for its own hedge fund replication ETFs and make the push into the space on its own. In addition to five new hedge fund replication ETFs, Goldman will be leveraging the skills of Westpeak Global Advisors, a boutique investment firm focused on factor based investing that Goldman purchased earlier this year.

Recently filed documents with the Securities and Exchange Commission (SEC) outline its intent to launch 11 ETFs that will emulate both smart beta and hedge-fund strategies. The range of smart beta ETFs will be branded with the new moniker “ActiveBeta” – a take on the somewhat controversial “smart beta” concept. Goldman will produce the underlying indices on which the ActiveBeta ETFs will be based

The new Goldman Sachs ETFs will be passive in that their investments processes will be rules-based, but they will be active in that their methodologies will not be based on market capitalization and will attempt to outperform broad-market indices. Rather than weighing investments by market cap, Goldman Sachs’ Active Beta products will use other gauges, such as momentum, quality and beta to determine allocations.

The ETFs Goldman Sachs intends to launch include six alternative beta ETFs, as follows:

  1. The Goldman Sachs ActiveBeta International Equity ETF
  2. The Goldman Sachs ActiveBeta Emerging Markets Equity ETF
  3. The Goldman Sachs ActiveBeta Europe Equity ETF
  4. The Goldman Sachs ActiveBeta Japan Equity ETF
  5. The Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF
  6. The Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF

And five hedge fund replication ETFs:

  1. The Goldman Sachs Multi-Strategy Hedge Fund Tracker ETF
  2. The Goldman Sachs Relative Value Hedge Fund Tracker ETF
  3. The Goldman Sachs Equity Long Short Hedge Fund Tracker ETF
  4. The Goldman Sachs Event Driven Hedge Fund Tracker ETF
  5. The Goldman Sachs Macro Hedge Fund Tracker ETF

Goldman Sachs, along with other large financial institutions, has been increasing its involvement in ETFs in general and liquid alts in particular over much of the past year. Both areas are growing, and the “alternative beta” subset of the liquid alternative product category is growing fastest of all, garnering $1 out of every $5 invested in ETFs today, according to InvestmentNews.

But despite numerous regulatory filings, none of Goldman’s proposed smart beta or liquid alternative ETFs have launched as of yet. The company does manage alternative mutual funds and a pair of exchange-traded notes (ETNs), and should soon be coming to market with its new range of ETF products.

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