WisdomTree has launched its European UCITS ETF platform in Italy, with six new UCITS-compliant smart beta funds listed on Borsa Italiana.
The new ETFs, which provide exposure to large and small-cap US, European, and emerging markets equities, are: WisdomTree Europe Equity Income UCITS ETF, WisdomTree Europe SmallCap, WisdomTree US Equity Income UCITS ETF, WisdomTree US SmallCap Dividend UCITS ETF, WisdomTree Emerging Markets Equity Income UCITS ETF, and WisdomTree Emerging Markets SmallCap Dividend UCITS ETF.
The establishment of WisdomTree’s European business marks a number of firsts for the European ETF industry. WisdomTree is Europe’s first ETF provider focussed on dividend-weighted smart beta ETFs and Europe’s first issuer of dividend-weighted small-cap smart beta ETFs.
WisdomTree’s UCITS ETFs started trading on the London Stock Exchange in October 2014, and will now start trading on Borsa Italiana from today 20 January 2015. They will initially be traded in EUR. The ETFs are Irish-domiciled and physically replicated, with the underlying shares being held with State Street, a global leading custodian and administrator. One of the world’s leading ETF market makers, KCG Europe, will act as market maker for the products.
The six funds track proprietary WisdomTree indices with multi-year track records. The indices are designed to be an alternative to market capitalisation-weighted indices, which weight stocks on price alone. We believe the major flaw with market capitalisation weighted indices is that as stocks increase in price, their weight in the index increases and vice versa, as stocks decrease in price, their weight in the index decreases. As a result, an index whose weights are based on market capitalisation may overweight overvalued stocks and underweight undervalued stocks.
WisdomTree pioneered indices weighted by the Dividend Stream – defined as the sum total of regular dividends paid in a particular index. Historically, dividends have provided a majority of the stock market’s real return over time[2] and unlike other factors, dividends are an objective measure which are not affected by accounting treatments. Dividends are a major factor in determining stock price and a useful measure in determining company profitability and value, rather than stock price alone. In today’s low-yield world, a dividend-weighted ETF may increase the portfolio’s trailing 12-month dividend yield and provide extra income. Each ETF seeks to distribute dividends on a quarterly basis.
Additionally, WisdomTree’s dividend indices offer a number of potential benefits: founded on experience and transparency, many of the indices have live track records since 2006 or 2007, broad exposure to companies in the index, and access to a different weighting methodology which brings potential diversification benefits to a portfolio when held alongside market cap-weighted assets, by potentially reducing risk, increasing returns, or both.
