Oppenheimer's Derby Day Puts Funds, Not Horses, in Post Position

(Bloomberg) -- And they're off! Not horses -- ETFs.

As racing fans turn their eyes to Churchill Downs for this weekend's Kentucky Derby, OppenheimerFunds Inc. is hosting its own Run for the Roses using portfolios instead of ponies.

The New York-based money manager is inviting investors to create their own “horses'' from five strategies that mirror the firm's exchange-traded funds, and then go head-to-head against each other and the Russell 1000 Index. Unlike the Kentucky Derby, everyone can place their bets until May 31, with the best portfolio on Sept. 1 winning $25,000 for the favorite charity of its “jockey.”

The move is part of Oppenheimer's push to attract attention to its smart-beta funds, which use quantitative factors -- such as value, size or momentum -- to determine the stocks they buy. The strategies have long had a following among institutional investors, but as they become increasingly popular with the retail set, asset managers are going to greater lengths to nose ahead in the crowded field. Hence, the Oppenheimer Factor Derby.

“The way we as human beings tend to learn is experiencing things live,” said David Mazza, Oppenheimer's head of ETF investment strategy. “While the academic underpinnings of smart-beta go back to the 1930s, the marketing of them and the packaging of them are new.”

Democratizing Smart-Beta

To enter the race, contestants will create thoroughbreds using momentum, low volatility, size, value and quality indexes that correspond with Oppenheimer's ETFs. One jockey might opt to go all-in on momentum, for example, while another could build a horse out of all five strategies.

Oppenheimer's far from the first fund manager to push smart-beta for the masses. BlackRock Inc. has a free online tool to help investors analyze factors and is encouraging advisers to ditch their traditional style box in favor of a factor-based grid. Meanwhile, Goldman Sachs Group Inc., has lowered the cost of its funds to as little as 9 basis points, securing it a spot on Betterment's $10 billion robo-adviser platform.

“We're educating in a different way,” said Ed Nini, head of ETF investment marketing on Oppenheimer's beta solutions team. “All the competitors out there are doing the same stuff -- it's not gamification, it's not simplifying, it's actually making it more complex.”

In the Factor Derby, Oppenheimer's hoping to get entries from mom-and-pop investors, broker-dealers, and -- hopefully -- registered investment advisers.

Taking part is free. Just bring your own mint julep.

To contact the reporter on this story: Rachel Evans in New York at revans43@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Eric J. Weiner

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