Add the name Wells Fargo & Co. (WFC) to the list of large banking institutions looking to establish a foothold in the fast-growing $4.1 trillion exchange-traded funds (ETFs) asset-management industry. The embattled San Francisco-based bank plans to launch its first-ever ETF next year, according to Bloomberg. But it won't be your typical ETF.

Bloomberg, which cited company executives, noted that Wells Fargo's ETF could come within three to six months. As with the ETF's recently launched by JPMorgan Chase & Co. (JPM) and Goldman Sachs Group (GS), Wells Fargo's fund is poised to be of the new-age multi-factor smart beta variety. Wells Fargo, which in October acquired small quant specialist Analytic Investors LLC, has been growing its quant capabilities likely for this exact reason. (See also: When Multi-Factor ETFs Make Sense)

Getting in and out of multiple asset classes within a second's time–given multiple factors–offers investors a distinct advantage over human-based trades. But these ETFs also come with tons of risk, while the reward isn't always breathtaking. Alex Bryan, director of passive-strategies research at Morningstar earlier this year called the ETF's approach more “aggressive.”

Bryan explains that these ETFs should deliver higher returns when its factors are working, and trail the market in a more pronounced way when they aren’t. And while the multi-factor component is a nice selling point to investors seeking diversification, Bryan argues that the exclusion of low volatility as a factor could make these ETFs "incrementally riskier" during choppy markets. Not to mention their relatively high expenses, at 0.35%. 

Still, while some analysts regard these new ETFs as replacements for pricier actively-managed equity funds, their popularity continue to rise. As of the most recent quarter, there were almost 200 multi-factor ETFs currently on the market, managing almost $40 billion in assets, according to Morningstar. And several of these funds trail the major indexes in terms of performance.

It remains to be seen whether Wells Fargo's new ETF, which may include factors such as risk parity and volatility, can outperform its peers or will it just one more name added to a long list of average, yet costly, returns.

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