Watch Out, ETF Issuers. USAA's $5.5 Billion Could Be Going Home

(Bloomberg) -- BlackRock Inc., Vanguard Group and Goldman Sachs Group Inc. have a new competitor for the $5.5 billion that United Services Automobile Association has invested in exchange-traded funds: USAA itself.

The San Antonio-based insurance and financial planning firm is getting into the ETF business, listing four equity funds and two debt products on the New York Stock Exchange this week, the company said in a statement. While that doesn’t mean USAA will immediately pull the capital it has in other ETF holdings, the pressure is on rival funds to offer strategies that the firm can’t find at home.

“We’re taking our best practices and the research that we’ve done in buying ETFs, and packaging that up in a way that we think is different,” said Lance Humphrey, a money manager in the global multi-assets team at USAA. After evaluating whether these funds fill a gap in a portfolio, “then we’ll determine if we think that there’s a better fit in the USAA ETF compared to some of our others.”

That’s proving slightly uncomfortable for issuers like Goldman Sachs, which counts on USAA as the largest outside buyer of some of its ETFs. USAA also owns significant stakes in funds run by BlackRock, Vanguard, Charles Schwab Corp. and Invesco Ltd.’s PowerShares unit.

USAA’s new funds will be available on its commission-free platform, alongside products issued by Fidelity. The company is also discussing distribution via other online platforms, including those run by Schwab, Fidelity and TD Ameritrade Holding Corp., according to Keith Sloane, the firm’s vice president of third-party distribution.

The new funds are:

  • USAA MSCI USA Value Momentum Blend Index ETF (ULVM)
  • USAA MSCI USA Small Cap Value Momentum Blend Index ETF (USVM)
  • USAA MSCI International Value Momentum Blend Index ETF (UIVM)
  • USAA MSCI Emerging Markets Value Momentum Blend Index ETF (UEVM)
  • USAA Core Short-Term Bond ETF (USTB)
  • USAA Core Intermediate-Term Bond ETF (UITB)

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