Our First Integrated ETF Seeks to Generate Global Income
WisdomTree’s First Integrated ETF Solution
The first exchange-traded funds (ETFs) kicked off a revolution in the way investors approached markets. ETFs offered investors a way to access asset classes in a newer, more transparent, more liquid and more tax-efficient structure. As a result, over the past decade, hundreds of billions of dollars in assets have migrated out of equity mutual funds and into equity ETFs. During this period, WisdomTree has helped pioneer investment strategies seeking to improve upon traditional market capitalization-weighted strategies by creating fundamentally weighted equity and fixed income strategies, as well as currency-hedged equity strategies.
Our latest innovation is designed to give investors an alternative to traditional actively managed balanced funds, with a particular focus on increasing global income. Just as many active managers fail to outperform individual stock and bond indexes over time, many balanced funds, which include both stocks and bonds, may not attain the return of a simple composite benchmark, which today can be nearly replicated by using just two cap-weighted ETFs.
WisdomTree has created a global multi-asset-class Fund that includes both stocks and bonds and that seeks to generate income for investors greater than what can be achieved through a traditional cap-weighted balanced fund. In December 2017, WisdomTree introduced its Balanced Income Fund (WBAL), which seeks to track the performance of the WisdomTree Balanced Income Index (WTBAL) before fees and expenses. The WisdomTree Balanced Income Index seeks to offer greater income in a globally diversified 60/40 equity/fixed income portfolio, while seeking to maintain total return potential.
One-Stop Shopping: Marrying WisdomTree’s Proven Track Record with Cutting-Edge Innovation
The WisdomTree Balanced Income Fund offers investors access to asset classes across the globe. It uses WisdomTree strategies that have proven themselves in the marketplace over the past decade. It also incorporates the firm’s latest and some of its best ideas—and it does so all in one ticker: WBAL.
The Index WBAL is designed to track, WTBAL, comprises both WisdomTree and non-WisdomTree ETFs (typically to gain access to asset classes WisdomTree does not cover). Using actual income distributions over the trailing 12 months of the ETFs in the Index, WTBAL generated 3.0%, roughly 90 basis points (bps) of additional yield compared to the benchmark, which consists of a 60/40 blend of the MSCI All Country World Index and the Bloomberg Barclays U.S. Aggregate Index.1
A Foundation of Rules-Based, Income-Generating Building Blocks
WisdomTree has championed rules-based investing since the 2006 launch of its first 20 fundamentally weighted ETFs. Many of them have posted attractive risk-adjusted performance since inception because our original research played out in real time.
Given market realities, some global 60/40 portfolios, yielding around 2%, leave much to be desired. Either they take on concentration risk or hone in on speculative markets—or both. By targeting WisdomTree ETFs that weight their components by the dollar volume of their dividends instead of by their market capitalization, and doing something similar on the fixed income side (income weighting), our approach may help alleviate some of the sector, country or credit bets commonly associated with strategies that search for yield, but that may disappoint long-term investors also seeking competitive total returns.
For investors seeking a simple way to access global sources of income inside a single ETF, consider WisdomTree’s new ETF of ETFs: the WisdomTree Balanced Income Fund (WBAL).
1For information on the equity yield of the underlying Index or on current holdings inside the Fund, please visit the WBAL page.
Luciano Siracusano is WisdomTree’s Chief Investment Strategist. He is the co-creator, with CEO Jonathan Steinberg, of WisdomTree’s patented Indexing methodology. Mr. Siracusano led WisdomTree’s sales organization from October 2008 until June of 2015, while also serving as the firm’s Chief Investment Strategist. Luciano stepped down as WisdomTree’s Head of Sales in 2015 to focus full time on his duties as Chief Investment Strategist. From 2001 until October 2008, Luciano was WisdomTree’s Director of Research and was responsible for the creation and development of WisdomTree’s proprietary stock indexes. Luciano is a regular guest on CNBC and FOX Business, and speaks and writes frequently on ETFs, indexing and global financial markets. A former equity analyst at Value Line, Luciano began his career as a speechwriter for former New York Governor Mario Cuomo and HUD Secretary Henry Cisneros. He graduated from Columbia University with a B.A. in Political Science in 1987.