WisdomTree has launched the WisdomTree US Efficient Core UCITS ETF (NTSX). NTSX, seeks to track the price and yield performance, before fees and expenses, of the WisdomTree US Efficient Core UCITS Index (the “Index”) and has a total expense ratio of 0.20 per cent. NTSX, has listed on Börse Xetra and Borsa Italiana, and will list on the London Stock Exchange.
The index is designed to deliver a 90 per cent exposure to large cap US equities and 60 per cent to US Treasury futures, effectively providing a leveraged, more capital efficient alternative to the traditional 60/40 portfolio. The ETF represents the first of its kind in Europe, the firm says.
The ETF invests 90 per cent of its assets in a diversified basket of the 500 largest US companies, by market capitalisation, that meet WisdomTree’s ESG (environmental, social and governance) criteria. To help magnify the benefits of the asset allocation, a 60 per cent exposure to US Treasury futures is then overlaid on top, using the remaining 10 per cent of the portfolio as cash collateral for the futures. The futures portfolio consists of an equal-weight basket of five US Treasury futures contracts with maturities ranging from two to 30 years. The exposures are rebalanced quarterly.
The strategy behind the WisdomTree US Efficient Core UCITS ETF is grounded in academia and based on modern portfolio theory, the firm writes. Academics have long argued that the optimal portfolio for a given level of risk is a leveraged version of the portfolio that presents the best Sharpe ratio. By leveraging a traditional 60/40 portfolio, investors can receive a similar level of volatility present in a portfolio 100 per cent allocated to equities but with the better Sharpe ratio of a 60/40 portfolio.
Pierre Debru, Head of Quantitative Research & Multi Asset Solutions, WisdomTree, says: “We believe investors can look at this ETF as a core US equity replacement. WisdomTree’s US Efficient Core strategy can provide greater return enhancement, risk management and diversification potential versus a 100 per cent equity portfolio. It may have similar volatility to a 100 per cent equity allocation over market cycles, but our research shows it can help reduce drawdowns and potentially provide higher risk-adjusted returns too. Additionally, it can be used to replace a combination of stocks and bonds, in an effort to create a more efficient portfolio that frees up space for allocations to other diversifiers or alternative strategies, like broad commodities, gold or crypto assets.”
Alexis Marinof, Head of Europe, WisdomTree, says: “In challenging market environments, investors need access to more tools and solutions to help them achieve their investment objectives. Our US efficient core ETF can help investors create optimal portfolio blends and magnify portfolio exposures through the same concept that drives their asset allocation. WisdomTree was founded on providing investors with innovative exposures and we continue to focus on bringing products to market that add value to our clients and their portfolios.”
