What's Behind WisdomTree's Newly Proposed ETFs?

WisdomTree has quite a few ETFs that track fundamentally weighted indices, a few currency ETFs, and one US bond ETF. Now they are filed to launch three actively managed ETFs. The three funds are:

• WisdomTree Real Return Fund
• WisdomTree Managed Futures Fund
• WisdomTree Long-Short Equity Fund

The first fund’s investment objective is straightforward. Like its name implies, WisdomTree Real Return Fund attempts to achieve returns in excess of inflation This fund can invest in almost anything that protects against inflation.

The second fund, WisdomTree Managed Futures Fund, is where the investment objective isn’t as clear. The filing’s description:

The WisdomTree Managed Futures Fund seeks to provide investors with the potential to achieve positive total returns in both rising and falling markets. The Fund’s investment objective is non-fundamental and may be changed without shareholder approval.

Sounds like another hedge fund ETF.

The third ETF is a market neutral long-short fund. It basically invests invests in products which track fundamentally weighted WisdomTree Indexes and hedges them with short positions in capitalization weighted indexes.

I’m not so sure the last fund is a good idea. The WisdomTree fundamentally weighted indexes are still diversified indexes, and I doubt there ability to achieve returns far in excess of capitalization weighted indexes.

Comments

[donzelion:]

In general, I'd concur with the skepticism regarding WisdomTree's fundamentally weighted funds in ordinary markets. In emerging markets, however, abuses against minority shareholders are so rampant as to make investment quite unreliable: everyone wants to ride the next Enron or Satyam bubble, but no one has the ability to pierce through the PR and actually analyze the companies to see which are for real and which are not. Even the most active manager who has toured a hundred factories has barely tipped the ice berg in terms of what is actually going on.

Hence, I'd demand the same surety that I would in a 1930s America: cash (preferably in the form of dividends or buybacks). WisdomTree's ETFs seem to be better plays on emerging markets, but I'm unconvinced about the case elsewhere.

Jun 07 10:35 AM