WisdomTree's Head of Fixed Income Strategy Talks AGGY and USFR Barbell Approach on NYSE's What's the Fund
Judy Shaw: Hi, I’m Judy Shaw on the floor of the New York Stock Exchange, along with Matt Kobach, for another segment of What’s the Fund. Joining us today is Kevin Flanagan. Kevin is the Head of Fixed Income Strategy at WisdomTree Asset Management. Welcome, Kevin.
Kevin Flanagan: Thanks for having me. Appreciate it.
Judy Shaw: OK, so, why are you here today? What’s the fund you’re here to talk about?
Kevin Flanagan: Well, it’s interesting. Given the bond market landscape, and perhaps more importantly the outlook, instead of just focusing on one fund, I think looking at a fixed income solution makes more sense in this environment. So, what we’re talking about is called a barbell strategy. It’s a time-tested approach for fixed income, and two of our funds that we will include in this strategy will be the WisdomTree Yield Enhanced U.S. Aggregate Bond Fund, ticker AGGY, and then the WisdomTree Floating Rate Treasury Fund, ticker USFR.
Judy Shaw: Great.
Matt Kobach: So, let’s talk about the current market and why you think this approach is effective.
Kevin Flanagan: Yeah, I mean there are so many cost currents going on, whether it’s looking at changing Fed policy, where the economy is going, trade uncertainty—global growth concerns. Instead of making a high-conviction bet, what the barbell approach does, that I mentioned previously, is really allows investors to look at two ends of the weight-lifting apparatus. That’s what it is, a barbell. That one weight being AGGY, which essentially is for intermediate, longer duration type of vehicle, focusing on income, maybe total return. And, that other weight on the barbell, USFR, is more short duration, flat or inverted yield curve probably makes sense, and also, if you are concerned if perhaps things don’t go as expected and rates don’t go down and they actually go up, provides protection in that vantage point.
Matt Kobach: So, I think I understand this analogy, you’re saying they weigh each other out so they end up balancing each other, what that barbell strategy means.
Kevin Flanagan: Yes. Yes, and you can toggle the weights back and forth. You can be 60-40, 50-50, 40-60, whichever fits your needs as a fixed income investor.
Judy Shaw: Now, are there any other strategies in the fixed income space that make sense in the current market?
Kevin Flanagan: Yeah, I mean there’s a lot of concern in the bond market about where we are in the credit cycle. So, what we would do is try to focus on is screening for quality in the environment that we’re in on the present time. Looking at the health of balance sheets, we think if you’re investing specifically in high-yield credit that’s what you should be focusing on.
Matt Kobach: So, if someone wants to learn more, where do we go?
Kevin Flanagan: www.wisdomtree.com. We have plenty of literature on both AGGY and USFR, and also we’ve been writing updated blogs on the barbell strategy.
Judy Shaw: Great.
Matt Kobach: Guys, go check it out.
Judy Shaw: Thank you, Kevin.
Kevin Flanagan: Thank you.