Wells Fargo Funds Management, LLC, the investment advisor to Wells Fargo Advantage Funds, has launched the Wells Fargo Advantage Absolute Return Fund (WARAX), which invests substantially all of its assets in a master fund that is managed by respected institutional money manager GMO LLC.
The Wells Fargo Advantage Absolute Return Fund makes GMO’s absolute return strategy available to individual investors for the first time. The fund is the second Wells Fargo Advantage Fund to offer investors access to a GMO-managed strategy.
"We believe this fund, which is sufficiently nimble to take advantage of any and all global market opportunities, provides investors an appealing alternative to traditional, style box-focused mutual funds," says Karla Rabusch (pictured), president of Wells Fargo Advantage Funds. "Our new fund has the added benefit of supplying our investor clients with a second, distinct investment vehicle from which they can tap into a GMO-managed strategy."
Absolute return investing is an alternative to conventional asset allocation. The overarching aim of the Wells Fargo Advantage Absolute Return Fund is to generate a positive return and prevent loss of capital. Specifically, the fund strives to generate a positive total return over inflation during a market cycle, regardless of market conditions. The fund will strive to achieve this goal by using an approach that is founded on the premise that asset class valuations and returns revert to mean levels over time.
Among the most notable aspects of the Wells Fargo Advantage Absolute Return Fund are its flexibility and the expertise of GMO. The fund is not constrained by asset class weights or specific exposure to any particular market, sector, country, or capitalisation. GMO is free to look for opportunities among a broad array of investments, including alternative strategies. To be sure, GMO will use a wide range of nontraditional strategies, including Treasury Inflation-Protected Securities (TIPS), emerging debt, currencies, options, spread trades, and natural resources. The fund can also invest in commodities, real estate, and long/short strategies.
GMO, which also manages the master fund in which the Wells Fargo Advantage Asset Allocation Fund invests, has honed its ability to warn of bubbles and take advantage of opportunities in various asset classes. To assess relative values and risks among asset classes, GMO developed a proprietary seven-year forecasting model that has guided its investment decisions for two decades. GMO will apply this model to the Wells Fargo Advantage Absolute Return Fund.
The relationship with GMO illustrates how Wells Fargo Advantage Funds’ multi-boutique model leverages the expertise of independent investment teams. This approach allows managers to operate autonomously, using their own proprietary research and analysis to implement their respective strategies. GMO, which has consistently provided value-added performance across a broad range of asset classes, now brings its ability to identify mispriced asset classes to two Wells Fargo Advantage Funds, giving investors access to its experience and capabilities.