WisdomTree Barbell Strategy
As the Fed continues to signal its intent to raise rates, we believe it’s prudent to mitigate overall duration risk by implementing a solution that reduces or hedges it out. Consider our Barbell approach as a strategic solution for fixed income investing by exploring selected fund pairings to potential impact on yield, duration and risk using our interactive Tool. Watch this video to learn more about the WisdomTree Barbell strategy, how it works and the Tool you can use to see the impact of our selected fixed income allocations in your portfolio today.
Although interest rates have risen from their pandemic-related trough, they remain historically low and are poised to move higher in the years to come. Investors should consider the time-tested “barbell” approach to fixed income allocations. This approach attempts to take “rate calls” out of the process while also serving to mitigate potential rate risk. WisdomTree offers three different barbell solutions to consider based on an investor’s income needs and risk parameters:
U.S. Treasury-Based, using WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY) paired with the WisdomTree Floating Rate Treasury Fund (USFR)
Investment Grade-Based, using WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY) paired with the WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund (AGZD)
Core Plus, using WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY) paired with the WisdomTree Interest Rate Hedged High Yield Bond Fund (HYZD)
The desired outcome for each solution is enhanced yield and lower interest rate risk.
When USFR, AGZD or HYZD is used in conjunction with AGGY, we believe it's possible to generate the same yield, if not more, of the Bloomberg U.S. Aggregate Bond Index, known as the Agg, while significantly reducing duration, or interest rate risk.
Investors may also want to consider combining our three rate-hedge solutions with their current core bond holdings in an ‘open-architecture’ approach.
To use the WisdomTree Barbell tool, simply select from the available funds in the dropdown menu on the left, and then select your second fund on the right. The tool will display the portfolio yield to worst, 30-day yield, and the duration to show how the combination of funds using this barbell strategy could impact your overall asset allocation.
Browse all the details of the funds selected below for quick analysis.
We believe this tool can be a powerful way to explore product that can lower portfolio duration, therefore interest rate risk.
Try it today!
Before investing, carefully consider a Fund’s investment objectives, risks, charges and expenses contained in the prospectus available at WisdomTree.com. Read it carefully.
- Duration A measure of a bond’s sensitivity to changes in interest rates. The weighted average accounts for the various durations of the bonds purchased as well as the proportion of the total government bond portfolio that they make up.
Interest rate risk The risk that an investment’s value will decline due to an increase in interest rates.
Risk Also standard deviation, which measures the spread of actual returns around an average return during a specific period. Higher risk indicates greater potential for returns to be farther away from this average.