A Managed Fixed Income Solution for Today's Rate Environment
Published March 12, 2025
Andrew Okrongly, CFA
Director, Model Portfolios
Joe Tenaglia, CFA, CMT
Director, Model Portfolios
Joe Tenaglia, CFA, CMT
Director, Model Portfolios
Key Takeaways
- Interest rate volatility, particularly in 2022, was a huge challenge for conservative asset allocations focused on capital preservation.
- Advisors seeking shorter duration exposure often turn to single-ticker ETFs or mutual funds.
- The WisdomTree Short Duration Fixed Income Model Portfolio offers a diversified, actively managed alternative that is benchmarked to the Bloomberg Short-Term U.S. Aggregate Bond Index.
- Since inception, the Model Portfolio has delivered attractive income and total returns with lower volatility than core bond benchmarks.
Navigating Fixed Income in a New Rate Regime
We are in a new rate regime—elevated interest rates are here, and they bring both risks and opportunities. For some investors, particularly those in conservative, fixed-income-heavy allocations, the past few years have been a challenging environment.
While higher rates mean better yield opportunities, they also bring increased rate volatility. The most dramatic example of this came in 2022, when core fixed income strategies and benchmarks experienced some of the largest drawdowns in decades.
For advisors, this poses a key question: how do you navigate this environment? The standard playbook might involve shifting toward lower duration fixed income ETFs or mutual funds. But here's the challenge—many of these solutions are highly targeted at specific sectors, not opportunistic enough to respond to market changes or take on more credit risk than is ideal for conservative clients.
This is where the WisdomTree Short Duration Fixed Income Model Portfolio comes in.
The WisdomTree Short Duration Fixed Income Model Portfolio
Instead of relying on a single ETF or fund, our WisdomTree Model Portfolio Investment Committee actively manages a diversified multi-ETF strategy designed to offer:
- Diversified, multi-ticker construction—Rather than relying on a single bond ETF, our Model Portfolio includes multiple ETFs, providing exposure to different sectors, styles and credit qualities.
- Active management—The WisdomTree Model Portfolio Investment Committee continuously evaluates market trends and adjusts positioning dynamically.
- Risk-conscious approach—By benchmarking to the Bloomberg Short-Term U.S. Aggregate Bond Index, the Model provides core fixed income exposure with lower duration risk, aligning with conservative client objectives.
Why Benchmark to the Bloomberg Short-Term U.S. Aggregate Bond Index?
Traditional core bond portfolios track the Bloomberg U.S. Aggregate Bond Index, which currently has an effective duration of 6.10 years and a yield-to-worst of 4.55% years.1 While the yield is certainly attractive to many investors today, the duration exposes a portfolio to significant interest rate risk.
The WisdomTree Short Duration Fixed Income Model Portfolio is benchmarked to the Bloomberg Short-Term U.S. Aggregate Bond Index, which maintains a similar universe of investment-grade, USD-denominated bonds but restricts maturities to 1–5 years. As a result, it has a similar yield-to-worst of 4.19% but significantly lower 2.65-year duration, reducing sensitivity to interest rate fluctuations.1
Delivering Performance with Lower Volatility
Since its launch in June 2021, the WisdomTree Short Duration Fixed Income Model Portfolio has consistently provided:
- Attractive all-in yields suitable for today's higher-rate environment.
- Strong total returns, benefiting from both active sector selection and risk management.
- Lower volatility compared to the traditional U.S. Aggregate Bond Index.
WisdomTree Short Duration Fixed Income Model Portfolio Performance: Growth of $100 and Risk Statistics since Inception (5/31/21)
Source: WisdomTree, as of 2/28/25. You cannot invest directly in an index. Past performance is not indicative of future results. Performance is historical and does not guarantee future results. Current performance may be lower or higher than quoted. Investment returns and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Click here for Model and underlying Fund standardized performance.
Final Thoughts
For advisors seeking a thoughtful, risk-managed approach to fixed income, the WisdomTree Short Duration Fixed Income Model Portfolio offers a compelling solution—navigating today's volatile rate environment while keeping capital preservation front and center.
1 Source: Bloomberg, as of 3/4/25.
Important Risks Related to this Article
For financial advisors: WisdomTree Model Portfolio information is designed to be used by financial advisors solely as an educational resource, along with other potential resources advisors may consider, in providing services to their end clients. WisdomTree’s Model Portfolios and related content are for information only and are not intended to provide, and should not be relied on for, tax, legal, accounting, investment or financial planning advice by WisdomTree, nor should any WisdomTree Model Portfolio information be considered or relied upon as investment advice or as a recommendation from WisdomTree, including regarding the use or suitability of any WisdomTree Model Portfolio, any particular security or any particular strategy.
For retail investors: WisdomTree’s Model Portfolios are not intended to constitute investment advice or investment recommendations from WisdomTree. Your investment advisor may or may not implement WisdomTree’s Model Portfolios in your account. The performance of your account may differ from the performance shown for a variety of reasons, including but not limited to: your investment advisor, and not WisdomTree, is responsible for implementing trades in the accounts; differences in market conditions; client-imposed investment restrictions; the timing of client investments and withdrawals; fees payable; and/or other factors. WisdomTree is not responsible for determining the suitability or appropriateness of a strategy based on WisdomTree’s Model Portfolios. WisdomTree does not have investment discretion and does not place trade orders for your account. This material has been created by WisdomTree, and the information included herein has not been verified by your investment advisor and may differ from information provided by your investment advisor. WisdomTree does not undertake to provide impartial investment advice or give advice in a fiduciary capacity. Further, WisdomTree receives revenue in the form of advisory fees for our exchange-traded Funds and management fees for our collective investment trusts.
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About the contributors
Andrew Okrongly, CFA
Director, Model Portfolios
Andrew Okrongly joined WisdomTree in 2022 as a Director on the Model Portfolios Team. He is responsible for the design and ongoing management of model portfolios and custom solutions for portfolio managers and advisors. Andrew is also a member of the Model Portfolio Investment Committee. Prior to joining WisdomTree, Andrew was a Director on the Outsourced Chief Investment Officer (OCIO) team at Commonfund, where he was responsible for macro-economic analysis and advising institutional clients on strategic and tactical asset allocation. Andrew began his career at BlackRock where he held a variety of fixed income and multi-asset investment roles. Andrew received a BBA degree from the University of Michigan and is a holder of the Chartered Financial Analyst designation.
Joe Tenaglia, CFA, CMT
Director, Model Portfolios
Joe Tenaglia joined WisdomTree as Asset Allocation Strategist in 2016. He is responsible for building and managing WisdomTree’s CIO-managed and custom model portfolios. In this role he focuses on asset allocation, security selection, and portfolio construction for the firm’s open architecture models, with objectives ranging from strategic to tactical. Joe sits on WisdomTree’s Model Portfolio Investment Committee, which oversees the firm’s ETF models and helps shape and communicate WisdomTree’s thoughts on the markets. Prior to joining WisdomTree, he held roles at Emerging Global Advisors (acquired by Columbia Threadneedle) and BNY Mellon. Joe received his B.S. in Finance and Marketing from Boston College. He is a holder of both the Chartered Financial Analyst designation and Chartered Market Technician designation.
Joe Tenaglia, CFA, CMT
Director, Model Portfolios
Joe Tenaglia joined WisdomTree as Asset Allocation Strategist in 2016. He is responsible for building and managing WisdomTree’s CIO-managed and custom model portfolios. In this role he focuses on asset allocation, security selection, and portfolio construction for the firm’s open architecture models, with objectives ranging from strategic to tactical. Joe sits on WisdomTree’s Model Portfolio Investment Committee, which oversees the firm’s ETF models and helps shape and communicate WisdomTree’s thoughts on the markets. Prior to joining WisdomTree, he held roles at Emerging Global Advisors (acquired by Columbia Threadneedle) and BNY Mellon. Joe received his B.S. in Finance and Marketing from Boston College. He is a holder of both the Chartered Financial Analyst designation and Chartered Market Technician designation.