Between the combination of attractive valuations outside the U.S. and this being an election year in the U.S, advisors may want to add a dash of international equity exposure to client portfolios. The Siegel-WisdomTree Global Equity Model Portfolio accomplishes that objective.
“WisdomTree’s collaboration with Professor Siegel brings a unique solution to investors with mid- to long-range time horizons who are trying to balance current income needs with longevity risk,” according to WisdomTree. “The Siegel-WisdomTree Global Equity Model Portfolio provides diversified exposure to the U.S and International stocks and tilts toward factors such as dividend yield and low P/E ratios to seek higher income generation and outperformance potential.”
Currently, the Siegel-WisdomTree Global Equity Model Portfolio is currently 100% in equities, allocations that are spread across 13 domestic and international ETFs, including funds issued by WisdomTree and other sponsors.
The WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE ) is a part of that model portfolio and it’s an example of an ETF that could benefit from regime change here in the U.S. come November.
Jeff Weniger, WisdomTree asset allocation director, points out in a recent note that as former Vice President Joe Biden’s odds shorten in prediction markets, XSOE’s performance perks up.
“Trump’s game plan? Go hard on China—as hard as possible—every day between now and November. Nothing stirs up votes for an incumbent like an external threat,” writes Weniger. “It’s hard to see images of Houston’s fire department putting out the flames from China’s burned documents and not understand why Trump’s tactical strategy is a game of hardball.”
XSOE seeks to track the price and yield performance of the WisdomTree Emerging Markets ex-State-Owned Enterprises Index. Under normal circumstances, at least 80% of the fund’s total assets will be invested in component securities of the index and investments that have economic characteristics that are substantially identical to the economic characteristics of such component securities. The index is a modified float-adjusted market cap weighted index that consists of common stocks in emerging markets, excluding common stocks of “state-owned enterprises.”
Presidential candidates’ potential treatment of China is relevant on multiple levels for investors, not the least of which is that traditional emerging markets indexes are often heavily allocated to SOEs, including those of the Chinese variety.
State-owned enterprises (SOEs) are common in emerging markets strategies and are often prominent in three sectors – energy, financial services, and materials – through telecom and utilities, in some markets, have their share of SOEs, too. Conversely, XSOE is more heavily allocated to growth sectors – communication services, consumer discretionary and technology – that are not SOE-intensive and are less politically sensitive.
Broadly speaking, the Siegel-WisdomTree Global Equity Model Portfolio’s SOE exposure is light.