ETF issuer WisdomTree Investments has launched the WisdomTree Efficient Gold Plus Equity Strategy Fund (GDE), an actively managed ETF with an expense ratio of 0.20 per cent.
The firm writes that GDE provides exposure to a basket of US equity securities of large-capitalisation companies, generally weighted by market capitalisation, with capital efficient exposure to gold futures added on top.
Investors seeking to diversify their equity exposure will often allocate to fixed income or alternative assets, like gold, in separate trades – requiring two separate outlays of capital. WisdomTree believes that GDE is an innovative and capital efficient alternative for large cap US equity, multi-asset, or alternative ETFs.
“We are anticipating sustained elevated inflation over the next three to five years, and with historically low global interest rates and high inflation comes the need for diversification to hedge macro risks,” says Jeremy Schwartz, Global Chief Investment Officer at WisdomTree.
“We believe gold exposure is an important strategic diversifier for equity portfolios, but the challenge for long-term equity bulls has been a lack of desire to reduce core allocations to stocks to fund positions in gold. With GDE, investors can now add gold exposure on top of a traditional core stock allocation. In addition, GDE provides further leverage to our capital efficient suite of funds that started with stock and bond efficient combinations.”
The firm writes that to help magnify the potential benefits of the asset allocation, the strategy layers gold futures exposure on top of US equities.
Large-Cap U.S. Equity Basket – For every USD100 invested, USD90 is invested in US equity securities of large-capitalisation companies generally weighted by market capitalisation
Gold Futures – USD90 of U.S. listed gold futures contracts overlay the USD90 of equity exposure and USD10 of cash collateral
Cash Collateral – USD10 is kept in high-quality, short-term U.S. money market securities that earn returns comparable to US Treasury bills
Leverage – Based on this structure, the total accounting leverage of the strategy is enhanced to 1.8x, as for every USD100 invested there is USD180 of total exposure to equities and gold futures