By Chris Dieterich and Corrie Dreibusch
Three large brokerage firms are distancing themselves from money manager F-Squared Investments Inc., amid regulatory scrutiny of whether the firm overstated its track record.
RBC Wealth Management and Raymond James Financial Inc. have set limits on how much new business its advisers can conduct with F-Squared, according to people familiar with the policies. Wells Fargo Advisors has put the firm on “watch,” essentially a caution to advisers who either have invested or are considering investing clients’ money with the firm, people familiar with the matter say.
F-Squared, which oversees $27.7 billion, said in a filing submitted Friday that it had received a so-called Wells notice from the Securities and Exchange Commission indicating the commission is considering bringing a civil case against the company. The SEC notice isn’t a formal allegation of wrongdoing and gives the company a chance to respond.
Spokeswomen for RBC /zigman2/quotes/200638870/delayed CA:RY +0.48% , Raymond James /zigman2/quotes/201697413/composite RJF +0.97% and Wells Fargo /zigman2/quotes/203790192/composite WFC -0.56% declined to comment.
The developments at F-Squared could threaten to slow expansion at one of the biggest firms in a fast-growing corner of the market. F-Squared is the biggest firm in the increasingly popular business of selling portfolios built out of exchange-traded funds, which are baskets of stocks and trade throughout the day. Their popularity has surged as investors demand access to liquid, low-cost, passive investments that give access to specific slices of the market. F-Squared’s strategies also underpin a handful of popular mutual funds sold by Virtus Investment Partners Inc. of Hartford, Conn. A spokesman for Virtus didn’t respond to requests seeking comment.
F-Squared is the largest of the ETF-managed-portfolio strategists, a niche market that has grown in popularity among advisers as a destination for individual investors’ money. This year alone, the firm’s assets have surged 50%.