WisdomTree, known for its fundamentally-weighted equity ETFs and actively managed currency ETFs, has filed papers with the SEC to launch three actively-managed ETFs implementing hedge fund strategies. The three new funds are:
- WisdomTree Real Return Fund: Will invest in a portfolio of inflation-linked securities and other investment-grade fixed income securities, and will have “targeted exposures” to commodities.
- WisdomTree Managed Futures Fund: Will use a quantitative, rules-based model to invest in futures contracts, seeking to generate positive returns in both rising and falling markets.
- WisdomTree Long-Short Fund: Seeks market neutral exposure to global equity markets.
The Long-Short fund is particularly interesting, as this ETF combines WisdomTree’s affinity for fundamentally-weighted indexes with a traditional hedge fund strategy. According to the filing, the new ETF will attempt to “capture potential excess returns between the fundamentally-weighted WisdomTree indexes and comparable capitalization-weighted indexes.” So it sounds like this fund will take long positions in other WisdomTree ETFs with a corresponding short position in funds that track a similar index utilizing a different weighting methodology.
WisdomTree’s filing for its active hedge fund ETFs comes less than a month after the launch of the Grail Fund, the first truly actively-managed ETF. Despite a solid performance and a great deal of hype, the Grail Fund is yet to gain significant traction, with volume levels being its most significant shortcoming. Still, the Grail Fund is young and may yet attract sufficient investment to establish an improved level of liquidity.
The new WisdomTree funds also represent additional entries into the hedge fund ETF arena. This sector of the ETF industry is taking off just as traditional hedge funds are closing in record numbers. Given the numerous advantages of hedge fund ETFs over actual hedge funds, I wouldn’t be surprised if we see more of these funds introduced begin to slowly eat away at the market share of the traditional players in the space.
No expense ratios or ticker symbols were announced for the new funds.
View the full filing here.
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