• EQUITY
  • CURRENCY
    HEDGED EQUITY
  • CURRENCY
  • FIXED INCOME
  • ALTERNATIVE

Our Approach to Equities

Stock prices can—and do—deviate from their underlying value for many reasons. WisdomTree believes fundamentals like dividends or earnings offer more objective measures of a company’s health, value and profitability than stock price alone.

The majority of ETFs are market cap-weighted—meaning they give more weight to companies selling at higher prices than those offering stronger fundamentals. WisdomTree uses proprietary weighting methodologies designed to magnify the effect fundamentals - like dividends or earnings - have on risk and return characteristics.

Our Dividend Approach to Equities

Our Earnings Approach to Equities

  • DIVIDENDS
  • EARNINGS

Dividends and dividend stocks have historically outpaced inflation*, and offer the potential for income, income growth and capital appreciation. In our opinion, dividends can provide many benefits - regardless of the market direction. And weighting by the Dividend Stream® can magnify the effect dividends have on performance.**

  • Why Dividend Weighting
  • The Dividend Weighting Difference
  • WisdomTree Dividend Family

WisdomTree was the first investment manager to weight by the Dividend Stream. We do this to provide higher income and growth potential to investors. In the chart below, Professor Jeremy Siegel demonstrates the power of dividends by breaking the S&P 500 Index into dividend yield quintiles and tracking the growth of $1000 from December 31, 1957 to December 31, 2013. Not only did the stocks with the highest dividend yields more than triple the growth of the S&P over that time, they outperformed the stocks with the lowest dividend yields by nearly 600%.

In this hypothetical example, the dividend-weighted portfolio generates approximately 30% more dividend income and almost 1% of additional dividend yield than the market cap-weighted option. What's more—it did this using the same three stocks and the same initial investment.

Although earnings can provide an accurate picture of company profitability, in the quest for pure growth, we believe investors often pay too much for the "market." Weighting by the Earnings Stream* can reduce overall price-to-earnings (P/E) ratios**—in essence lowering the price of the market.

  • Why Earnings Weighting
  • The Earnings Weighting Difference
  • WisdomTree Earnings Family

WisdomTree weights by the Earnings Stream in order to magnify the effect earnings may have on performance. In the chart below, Professor Jeremy Siegel illustrates the importance of earnings by breaking the S&P 500 into quintiles based on price-to-earnings and tracking the growth of $1,000 from December 31, 1957 to December 31, 2013. Not only did the stocks with the lowest P/E ratios provide more than four times the growth of the S&P 500 over that time, they outperformed the stocks with the highest P/E ratios by more than 1200%.


WisdomTree Earnings ETFs weight stocks by their Earnings Stream—defined as the sum of aggregate earnings generated by all companies in that index—rather than by market cap. The hypothetical example below compares earnings weighting to market cap weighting.

Our Approach to Currency Hedged Equity

International investing provides many exciting opportunities to investors. But these opportunities can come with additional risks—one of which is currency fluctuations. WisdomTree's Hedged Equity family of Funds enables investors to access the growth potential of numerous markets around the world while hedging1 out the risks and volatility of the corresponding currency.

  • Why Hedge Currency
  • How We Hedge Currency
  • WisdomTree Currency Hedged Equity Family

International investment returns are typically made up of two parts: equity returns and currency returns. Not only can currencies add volatility2, but in some cases currencies can also be a headwind for equity returns. Hedging currency can help investors:

  • Gain purer exposure to the equity returns
  • Boost return potential for equity markets with negatively correlated3 currencies when the currencies are weakening
  • Reduce volatility

BOOST RETURN POTENTIAL

Most currencies are positively correlated with their local equity markets, meaning they often move up and down together. Some markets, however, in export driven economies like Japan are negatively correlated, so equities tend to rise as the yen weakens. When this happens, the weakening yen drags down the equity returns. Hedging the yen can help investors more fully capture the pure equity returns, especially if one believes the yen is likely to weaken.

Currency Performance Chart

REDUCE VOLATILITY

Currency can be a source of additional volatility on top of local equity market volatility, so hedging currency exposure can reduce the volatility associated with international investments. Consider that you might still want to benefit from the growth of leading European companies, but might want to avoid the volatility associated with the euro. Hedging the euro may enable you to do that.

Sources Volatility Chart

We take a simple, rules-based approach to hedging currency.

MECHANICS OF THE CURRENCY HEDGE

Local Market Equity Return + Currency Return - Hedged Currency Return = Hedged Equity Return

IMPLEMENTATION AND ADJUSTMENTS

The hedge is implemented with short positions in 1-month forward contracts2 versus the U.S. dollar with month-end adjustments to offset the currency exposure inherent in the purchase of international equities by U.S. investors.

COST OF CURRENCY HEDGE DRIVEN BY

  • Difference in 1-month interest rates between the United States and country of potential hedged currency (the current differential is minimal).3
  • Liquidity4 (the bid/ask spread) of the forwards. JPY/USD, EUR/USD and GBP/USD5 are three of the most liquid markets for NDF contracts6 with small costs of trading.
  • The costs of hedging increases for emerging markets with higher interest rates and less liquidity in their forward contracts.

Our Approach to Currencies

WisdomTree believes that investors should consider the benefits of diversifying their cash holdings on a global basis. Diversifying currency holdings offers investors the potential to earn higher yields while lowering the risk inherent to holding assets in only one currency.

Although these Funds invest in very short-term, investment grade instruments, the Funds are not "money market" funds and it is not the objective of the Funds to maintain a constant share price.

Diversification does not eliminate the risk of experiencing investment losses.

  • The Case for Currency ETFs
  • The ETF Advantage
  • WisdomTree Currency Family

WisdomTree provides exposure to currencies within the ETF structure. WisdomTree Currency ETFs provide exposure to non-U.S. currencies and money market rates, while offering:

  • Higher yield potential
  • Prudent risk management
  • Tradable access to global currencies
  • Transparency* and low-fees**

The ETF structure offers a number of benefits to investors looking to invest in currencies:

  • Diversification. Each share represents a small ownership percentage in a range of securities, providing broad diversification potential with one simple, cost-effective investment.
  • Low fees. WisdomTree ETFs typically have lower management fees and expense ratios than many other investment types. Additionally, we do not charge a sales load. Note: ordinary brokerage fees apply.
  • Intraday liquidity. Investors can buy—or sell—shares at any time throughout the day.
  • Fully invested. Because liquidity is provided by the market, rather than WisdomTree, WisdomTree ETFs can remain fully invested all the time.
  • Tax efficiency. The creation/redemption mechanism of ETFs is what allows ETFs to be very tax-efficient. Specifically, when portfolio holdings can be transferred on an "in-kind" basis during redemptions it allow ETFs to be very tax efficient and able to minimize their capital gains distributions. The reason - when shares are re-deemed in-kind, the ETF is not liquidating or selling shares on the market which would trigger gains inside the ETF. Rather, with in-kind redemptions, an exchange is made between qualified institutional investors and the Fund company-in exchange for shares of the ETF, the qualified institutional investor receives underlying holdings of the Fund on an in-kind basis and that swapping of holdings for ETF shares does not trigger a taxable event for the fund.
  • Transparency. We list the assets in each fund on a daily basis here.

Our Approach to Fixed Income

How diversified are your fixed income holdings? If you're only holding U.S. fixed income instruments, such as bonds, the answer may be not enough. Through the dynamic combination of foreign interest rates and local currencies, WisdomTree's international fixed income ETFs offers investors income potential, diversification potential—and much more. In fact, they may enable you to obtain more complete asset allocation.

Diversification does not eliminate the risk of experiencing investment losses.
See important risk information below.

  • How We Build Fixed Income ETFs
  • The ETF Advantage
  • WisdomTree Fixed Income Family

WisdomTree takes a unique approach to fixed income investing. We look beyond market capitalization and the size of debts outstanding to consider fundamentals such as the capacity of countries and corporations to pay their debts. We combine the traditionally passive structure of ETFs with active risk management and security selection.

To manage key risks of liquidity, solvency and inflation, WisdomTree utilizes a disciplined active investment process focused on continuous risk management to unlock medium and long-term potential.

The ETF structure offers a number of benefits to investors looking to invest in fixed income:

  • Diversification. Each share represents a small ownership percentage in a range of securities, providing broad diversification potential with one simple, cost-effective investment.
  • Low fees. WisdomTree ETFs typically have lower management fees and expense ratios than many other investment types. Additionally, we do not charge a sales load. Note: ordinary brokerage fees apply.
  • Intraday liquidity. Investors can buy—or sell—shares at any time throughout the day.
  • Fully invested. Because liquidity is provided by the market, rather than WisdomTree, we can remain fully invested all the time.
  • Tax efficiency. The creation/redemption mechanism of ETFs is what allows them to be very tax-efficient. Specifically, when portfolio holdings can be transferred on an “in-kind” basis during redemptions it allow ETFs to be very tax efficient and able to minimize their capital gains distributions. The reason – when shares are re-deemed in-kind, the ETF is not liquidating or selling shares on the market which would trigger gains inside the ETF. Rather, with in-kind redemptions, an exchange is made between qualified institutional investors and the Fund company—in exchange for shares of the ETF, the qualified institutional investor receives underlying holdings of the Fund on an in-kind basis and that swapping of holdings for ETF shares does not trigger a taxable event for the fund.
  • Transparency. We list the assets in each fund on a daily basis here.

Our Approach to Alternatives

WisdomTree believes alternative investments provide a smart way to achieve diversification and performance potential in almost any market. However, these types of strategies have traditionally only been available to institutional investors. Through WisdomTree, these sophisticated strategies are available to all investors—in the desirable ETF structure.

Diversification does not eliminate the risk of experiencing investment losses.
Managed Futures are not suitable for all investors. Additionally, alternative strategies carry additional risks and are generally more volatile; please see important investor information below.

  • The Case for Alternative Investments
  • The ETF Advantage
  • WisdomTree Alternative Family

The markets of 2008 were enough to make even the most stalwart investor cringe. But a number of positives came out of them. One of the most crucial was that many investors became more aware of the critical importance of downside protection and true diversification. For many investors, traditional allocations, as it turned out, generally did not provide enough diversification. As the markets unwound, correlations between traditional asset classes increased. As a result, investors all over the world now recognize the need to diversify beyond traditional asset classes—and beyond traditional strategies.

Through ETFs, all investors can access the potential represented by alternative opportunities. Additionally, the ETF structure itself offers many benefits to investors:

  • Diversification. Each share represents a small ownership percentage in a range of securities and other instruments, providing broad diversification potential with one simple, cost-effective investment.
  • Low fees. WisdomTree ETFs typically have lower management fees and expense ratios than many other investment types. Additionally, we do not charge a sales load. Note: ordinary brokerage fees apply.
  • Intraday liquidity. Investors can buy—or sell—shares at any time throughout the day.
  • Tax efficiency. The creation/redemption mechanism of ETFs is what allows ETFs to be very tax-efficient. Specifically, when portfolio holdings can be transferred on an “in-kind” basis during redemptions it allow ETFs to be very tax efficient and able to minimize their capital gains distributions. The reason – when shares are re-deemed in-kind, the ETF is not liquidating or selling shares on the market which would trigger gains inside the ETF. Rather, with in-kind redemptions, an exchange is made between qualified institutional investors and the Fund company—in exchange for shares of the ETF, the qualified institutional investor receives underlying holdings of the Fund on an in-kind basis and that swapping of holdings for ETF shares does not trigger a taxable event for the fund.
  • Transparency. We list the assets in each fund on a daily basis here.
  • A consistent, transparent, rules-based strategy. Many alternative managers do not share their strategies and may change them without notice.
  • No K-1s.1 Alternative investments can often have complicated tax consequences. Wherein investors must wait for their K-1 in order to file their taxes. ETFs have no such requirement—and can actually be used to help manage taxes.
  • No redemption fees. You can sell your shares at any time without any redemption fees. Note: ordinary brokerage fees apply.
  • No investment minimums. Most alternative strategies have minimums that are prohibitive to many investors. ETFs have no minimum investments.