Wells Fargo Asset Management is to dismiss a group of third-party subadvisors in favor of its own investment teams on three of its funds in a move that will also see it cut costs on the strategies.
According to a Wells Fargo product alert, the firm is to replace Grantham, Mayo, Van Otterloo & Co (GMO) as subadvisor of the $3.2 billion Wells Fargo Asset Allocation fund with its own multi-asset solutions team. Managers Christian Chan, Kandarp Acharya and Petros Bocray are to oversee the fund.
The switch is to take place on June 15 and will also result in a change to the fund’s investment strategy, benchmark and expense ratio.
On the date of change, the fund is to allocate its assets among underlying Wells Fargo funds instead of the underlying GMO-managed funds it currently has positions in. It will also add the Russell 3000 index to its list of benchmarks.
Currently, it has a weight of 65% to the MSCI ACWI and 35% to the Bloomberg Barclays US Aggregate Bond index. When the changes take place, 45% of the fund will track the Russell 3000 with 20% and 35% to the MSCI ACWI ex USA and Bloomberg Barclays US Aggregate Bond index, respectively.
The net operating expense ratio on R, A and C class shares are to fall by 22 basis points (bps) each from 160bps to 138bps, 135bps to 113bps and 210bps to 188bps, respectively.
The Wells Fargo Asset Allocation fund is ranked 88 out of 141 Mixed Asset-Flexible Portfolio funds tracked by Citywire for three-year total returns to the end of January. Over that time it returned 17.3% compared to the average Mixed Asset-Flexible Portfolio fund, which was up 19.5%.
GMO remains as a subadvisor on the $5.7 billion Wells Fargo Absolute Return fund.
The Wells Fargo Multi-Asset Solutions team is led by Nicolaas Marais and has 21 members who manage approximately $28 billion in assets, as of December 31 2017.
Marais joined Wells from Schroders in the beginning of 2017, where he had been head of multi-asset investments.
The team is also set to make similar changes to the $185.6 million Wells Fargo Small Cap Opportunities fund, which was run by Marais' old shop.
On June 15, the fund’s name is to change from the Wells Fargo Small Cap Opportunities fund to the Wells Fargo Disciplined Small Cap fund to reflect its move from a solely fundamental approach to an approach that is more quantitatively driven.
The Golden Capital Equity team is based on Charlotte, North Carolina and has $10 billion assets under management, as of December 31, 2017. Wells Fargo initially acquired a minority stake in Golden Capital in 2008 and built up this stake until it took full control of the boutique in June 2017.
The net expense ratio on R6 shares are to drop from 85bps to 50bps, while administrative shares and institutional shares are to come down from 120bps to 85bps and from 95bps to 60bps, respectively.
On May 1, Wells Fargo’s Stageline Value Equity team is to replace Peregrine Capital Management as subadvisor of the $135.8 million Wells Fargo Small Company Value fund.
Garth Nisbet, Craig Pieringer and Jeff Goverman are to take over day-to-day management.
When Stageline takes over, the fund is to cut expense ratios on all share classes with the largest being its A and C share classes, which are to come down from 135bps to 115bps and from 210bps to 190bps, respectively.
Peregrine had been a wholly-owned subsidiary of Wells Fargo from 1984 until 2016, when it became a fully independent firm. Peregrine still subadvises the $1.9 billion Wells Fargo Small Company Growth fund which was closed to new investors on July 31, 2017.
‘These changes leverage the depth and breadth of our firm’s investment expertise and include reductions in shareholder expenses,’ a Wells Fargo spokeswoman said. ‘We will continue to use our expertise, rigorous investment review process, and broad investment capabilities to ensure we are offering clients competitive solutions to help them reach their financial goals.’