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Tuesday, January 27, 2015

The F-Squared Saga Reverberates Through B-Ds

News summary by MFWire's editors

The largest ETF managed portfolio shop in the business saw its assets under management jump 26.5 percent in the first three quarters of last year. And then the worm turned against it.

Sanders Wommack of RIABiz provides the latest update in the saga over performance reporting and backtesting of the Wellesley, Massachusetts-based shop's flagship AlphaSector U.S. equity indexes. Things took a sharp turn for the worse at F-Squared in the fall when it publicly revealed a receipt of a Wells notice from the SEC. F-Squared's founding chief, Howard Present, left in November as F-Squared brought in Laura Dagan as the new CEO. Last month F-Squared reached a $35-million settlement with F-Squared, but not with Present.

Now RIABiz reports that at least five broker-dealers and RIAs are reevaluating or limiting advisors' access to F-Squared's products: AssetMark is both cutting off new flows and moving existing assets; Raymond James has stopped flows to F-Squared; RBC Wealth Management is blocking use of F-Squared separately managed accounts; Stifel Nicolaus, like RayJay, has cut off flows to F-Squared; and Wells Fargo Advisors put F-Squared on a watch list. The trade pub notes that three of those five firms -- RayJay, Stifel, and Wells -- all have branches "just down the street from F-Squared headquarters in the same Wellesley office park."

At least two law firms, RIABiz adds, Robbins Arroyo and Rosen Law Firm, are sniffing around F-Squared, too, looking for class-action fodder.

F-Squared's woes have also translated into some pain for Virtus [profile], for whom F-Squared subadvises five mutual funds. RIABiz says Virtus' shares are down 35 percent their peak, though the trade pubis careful to note that "the SEC has not accused Virtus of any wrongdoing." Those F-Squared subadvised mutual funds still hold about $9.3 billion of F-Squared's in AUM. 

Edited by: Neil Anderson, Managing Editor


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