On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth talked about the the WisdomTree Floating Rate Treasury Fund (USFR ) with Money Life host Chuck Jaffe. The pair covered a range of topics related to the fund, providing investors with a deeper understanding of the ETF.
Chuck Jaffe: One fund, on point for today, and the expert to talk about it. Yes, this is the ETF of the Week, where we examine trending, new, newsworthy, unique, and intriguing exchange traded funds with the help of Todd Rosenbluth, the head of research at VettaFi. At VettaFi.com, you’ll find all the tools you need to dig into the ideas we talked about here and to get more information on mutual funds you’ve got or are considering. Check it out again at VettaFi.com.
Todd Rosenbluth. Great to chat with you again.
Todd Rosenbluth: It’s great to be back, Chuck.
Chuck Jaffe: Your ETF of the week is…
Todd Rosenbluth: The WisdomTree Floating Rate Treasury Fund. USFR.
Chuck Jaffe: USFR. The Wisdomtree Floating Rate Treasury Fund. And if I sound excited, it’s just because I’m always excited to talk to you Todd. Because as excitement goes, this fund. No, no, not exciting at all. But that’s the point, isn’t it?
Todd Rosenbluth: It is. I mean, so I figured boring is a good thing. And holding your own and treading water with short term floating rate treasuries, that’s as safe as I could possibly think of. And it feels like it’s the right time to be able to have that. So we’re recording this on Monday. Trump essentially called out Powell and said he wants rates being cut yesterday. I’m paraphrasing here. That is going to make the bond market more volatile.
The bond market is supposed to be a safe haven for many people. Treasuries is supposed to be a safe haven for many people. This 11 year old — again, this is not a new fund — this 11-year-old Wisdomtree ETF is the right fund for folks that want to ride out this market volatility in fixed income, and then come back to when there’s something more rational to put money to work.
Chuck Jaffe: In terms of parking places, because that’s really what you’re talking about, how do you decide which parking place you want? You want to use, I mean, floating rate treasuries versus some other form of short term or even intermediate term. You’re basically saying intermediate term’s too long. So it’s like super ultra short term. Why this instead of anything that doesn’t have floating rate in the name?
Todd Rosenbluth: Yeah. So I mean, we’re giving choices. So I think a few weeks ago we had an active ultrashort bond ETF that we focused on. This is a floating rate nature because the bond market has actually become more volatile since you and I talked then.
And so, if you’re uncertain about the next couple of months and you want to make sure you benefit from a floating rate aspect, this Wisdomtree fund is relatively cheap. It’s relatively liquid. It’s a great vehicle. It has a long history. So you can see how the bond market — how this ETF has performed during times of volatility in the bond market. So this is a really good choice for people who are looking for options to consider.
Chuck Jaffe: And it’s current yield. Last time I checked it was about 4.8%. Which means it was delivering more than you could get in, say, a money market fund.
Todd Rosenbluth: That’s right. So this is a better alternative to money markets. Of course, you get — well when it moves, the net asset value can move. But you can also get appreciation as opposed to a money market, which is just cash. And so you’re just going to keep the buck. So there is room for potential appreciation with an ETF. You get the liquidity of an ETF. And so I know we’re talking about this as a parking place. And that’s how I’m positioning it today. But this can also be a strategic, not just a tactical move, but a strategic move. And there are some advisors and investors we’re familiar with that are taking more of a barbell approach. This is their safe exposure, from a treasury standpoint.
And then they’re putting money into either AG like products or actively managed products. That can give you the chance for a higher reward in combinations. So you’ll get a little bit more than money markets with this ETF, more capital appreciation potential with this ETF. But you can balance this with other parts of your fixed income portfolio.
Chuck Jaffe: You know, frequently I ask you about how much of a portfolio this might be for someone. And obviously, it’s an individual decision. It’s one of those questions it’s almost impossible for you to really answer. But this is, as you just said, the kind of thing that could be an allocation choice for someone. And then now it would be the lean into it choice.
So two questions. One: How much of a portfolio would you let it be to be for somebody who maybe has it, but now wants to add to it, to just kind of say, this is my holding place? And then B: What’s going to be your sign that, you know, it’s time to get out of park?
Todd Rosenbluth: So the first part of how this fits into a portfolio, and what is your allocation — you’re right. This is a very difficult question. So if people are putting money in as a safe option and this is a version of cash, you can consider this to be a slightly better, reward potential option for cash. So I don’t know what someone’s allocation towards cash should be, whether it’s 5% or 10%, to make sure that they’re liquid.
If you’re going here because you’re nervous about the bond market, then this can be a larger allocation for somebody, where it can take up a larger slice of the portfolio in balance. Maybe that’s 50/50, with more traditional, higher risk but higher reward opportunities within the bond market. So it really matters as to what the use case is for this.
Is this used for cash and short term exposure or is this more of a, we’re parking here until we ride out the volatility? How do we know when it’s time to stop riding out the market volatility? I guess the market — the bond market will stop being as volatile as it currently is, and it won’t be causing overreactions.
We won’t see the same level of overreactions, but I think you have this as your exposure until you get a greater sense as to what the Fed’s next move is. Right now, they’re on hold. If they start a rate cutting program, they give the indications of a rate cutting program. Then you might want to go out a little bit further, take on a little bit more interest rate risk than you get with USFR.
Chuck Jaffe: Of course. The other way people could know that it’s time to move is when they come back to ETF of the Week down the line. And we’re saying, hey, here’s that risk on play that you might want to consider as we watch what happens with the market.
Todd, great stuff as always. It is the USFR or the Wisdomtree Floating Rate Treasury Fund.
The ETF of the Week. Todd, great to chat with you again.
Todd Rosenbluth: I’ll see you next time. Maybe less boring.
Chuck Jaffe: Never boring on the ETF of the Week. And the ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. I’d love it if you check out my hour long weekday program by going to moneylifeshow.com, or by searching for it wherever you find your favorite podcasts. And if you’re searching for more and better information on your favorite exchange traded funds, look no further than VettaFi.com, where they’ve got all the tools you need to help yourself out and better get a handle on your funds.
They’re on X, @Vetta_Fi and Todd Rosenbluth, their head of research, my guest here on ETF of the Week, he’s on X too, @ToddRosenbluth. The ETF of the Week is here for you every Thursday, so make sure you don’t miss an episode by following along or subscribing on your favorite podcast app. We’ll be back with another great ETF for you to consider next week. And until then, happy investing everybody!
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