WisdomTree Breaks Into 401(k) Market

WisdomTree is launching a low-cost 401(k) platform aimed at small- and medium-sized companies.

It will feature WisdomTree's own family of fundamentally weighted exchange-traded funds as well as ETFs from other providers and some mutual funds.

ETFs are baskets of securities that trade throughout the day on an exchange, like stocks. They have had a hard time making inroads into the lucrative retirement market. Earlier this year, BenefitStreet, a firm that handles 401(k) record-keeping, teamed up with Barclays Global Investors, a unit of Barclays PLC (BCS), the biggest ETF provider in the U.S., to launch a new platform.

By launching its own platform, WisdomTree is taking matters into its own hands, essentially eliminating the middle man

WisdomTree's 401(k) platform will be the first to offer ETFs based on fundamentally weighted indices, the firm's signature product. Unlike most indices, which weight component stocks according to their market capitalization, fundamental indices weight stocks according to other metrics such as earnings, revenue or dividends .

WisdomTree says market-cap weighting is riskier because these indices tend to overweight overvalued stocks and underweight undervalued stocks.

The New York company hopes the relatively low cost of its platform, which it puts at between 0.65% and 0.7% of a plan's assets, will also attract small- and medium-sized companies, which tend to pay higher fees.