Wells Fargo Custodians Extend Coverage to ITUs
Wells Fargo’s global manager research team has expanded its research coverage to include mutual funds (ITUs).
The wirehouse, which started researching UITs two years ago due to demand from advisers, officially launched a recommended list of 43 UIT equity strategies on Monday.
An ITU is a common investment vehicle that offers a fixed portfolio of stocks, bonds or other securities such as closed-end funds and ETFs, selected by a sponsor and deposited in a trust.
ITU policies generally have end dates which are defined when the ITU is created. For equity ITUs, the duration is generally 24 months or less; for fixed income ITUs, the duration could range from five to 30 years.
The UIT universe is dominated by four sponsors – First Trust, Invesco, Advisors Asset Management and Guggenheim – who together offer around 200 UIT equity strategies out of the 300 or so existing UIT stocks.
To focus on the effort, the managers’ research team assembled a five-person ITU working group led by research analyst Dival Vroom and research director Mariana Bush. Currently, the team only covers equity ITUs.
“The genesis of this began when the Department of Labor decision took effect and Wells Fargo Advisors decided to create a research-based ITU universe through the act of research to come up with a select group of ITU that would represent what we think are high conviction ideas among what’s on the platform, ”said Vroom.
For inclusion on the ITU coverage list, the team reviews qualitative and quantitative metrics such as a sponsor’s ability to initiate and manage ITUs, the experience and depth of the team. investment as well as the methodology for selecting an ITU strategy, its transparency, its investment performance and expenditure, etc.
After examining these characteristics, the team then examines how an ITU strategy complements the entire coverage list in terms of diversification and exposure. Finally, the team assigns “select”, “retain” and “sell” ratings to ITU strategies.
Wells Fargo is probably the first company to conduct manager research and due diligence on UITs, according to the team.
“This is what we say because it is what we understand. We haven’t heard from anyone else providing research on UITs and that’s what the sponsors are telling us as well, ”said Bush.
“If others want to join, I think that would be great, because the more people look to ITU, the stronger they will become. If there are ITUs that are weak and are not doing well, then the more the eyes are on them, the more selective they will become, ”she added.
Led by Greg Maddox, Head of Global Manager Research, Wells Fargo’s Global Managers Research Team is tasked with compiling a list of approximately 1,000 strategies for use by different lines of business in the business. These include Wells Fargo Advisors, Wells Fargo Private Bank, Abbot Downing Family Office, and Institutional Retirement Trust.
To learn more about Wells Fargo’s research process, read Citywire’s profile on Maddox here.