Exchange-traded Funds  

Wisdom Tree launches internationally-focused ETFs

Wisdom Tree launches internationally-focused ETFs

Wisdom Tree has launched a pair of exchange-traded funds on the London Stock Exchange that offer investors international exposure.

The Wisdom Tree US Multifactor Ucits ETF tracks the price and yield performance of its associated index and has a net expense ratio of 0.3 per cent.

The ETF's strategy encompasses a range of so-called smart beta factors, which all perform differently according to market conditions.

The ETF has consistent exposure to all of them, to ensure investors mitigate the risk of being in the worst-performing factor at the worst time.

Christopher Gannatti, WisdomTree's head of research in Europe, said the point of diversifying a portfolio was to minimise the risk of severe under performance over a given time frame.

Mr Gannatti said: "Many investors in US equities have watched the outperformance of momentum-focused strategies in the past few years. Instead of requiring them to decide if they want to chase this strategy or try to select the next factor poised for out performance, WisdomTree's multi-factor
approach ensures some exposure to momentum while also diversifying across other factors which may outperform in the coming periods."

Each constituent company is screened across all factors on a quarterly basis, helping to ensure that the strategy’s factor diversification is maintained, the company said.

Rafi Aviav, Wisdom Tree's head of product development in Europe, said the ETF had a high active share, despite the strategy’s sector-neutrality, which ensured excess returns would be consistently and purely driven by the strategy's stock selection.

Laith Khalaf, senior analyst at Hargreaves Lansdown, doubted the fund would be right for many retail investors.

Mr Khalaf said: "The product has a market, but it is fairly niche. It is quite complex in its construction and is more the preserve of institutional investors, who are fully versed in factor investing and have the time to understand the index."

He said many recent ETF launches were being aimed at large institutional investors, such as pension funds, who had become significant users of the products.

Also today (12 July), Wisdom Tree announced the launch of the Japan Small Cap Dividend Ucits ETF on the London Stock Exchange.

The fund tracks the price and yield performance of its associated index and has a net expense ratio of 0.48 per cent.

The index’s constituents derive more than 80 per cent of their weighted average revenue inside Japan, compared with 57 per cent for Japanese large-cap companies, Mr Gannatti said.