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PRESS ROOM

WisdomTree Launches Smart Beta Fund with Multifactor Exposure

Thursday 12th July '18


WisdomTree US Multifactor UCITS ETF (USMF)


WisdomTree, the exchange traded fund ("ETF") and exchange traded product ("ETP") sponsor, today announced the launch of the WisdomTree US Multifactor UCITS ETF on the London Stock Exchange. The fund seeks to track the price and yield performance of the WisdomTree US Multifactor Index and has a net expense ratio of 0.30%.

With the availability of an ever-greater amount of smart beta strategies, investors today can access individual factors associated with historical market-beating performance at fairly low cost. However, while it is now much easier to pick and choose factor exposures, it hasn’t gotten any easier to know which factor might perform strongly ahead of time. The true benefit of multi-factor strategies lies in diversifying factor exposures so that the risk of being in the worst-performing factor at the worst time is mitigated, thereby ensuring exposure across all of the factors at all times.

Christopher Gannatti, WisdomTree Head of Research in Europe said, “Diversification is about minimising the risk of severe underperformance over a given time period. 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 outperformance, WisdomTree’s multi-factor approach ensures some exposure to momentum while also diversifying across other factors which may outperform in the coming periods.”

“In the WisdomTree US Multifactor Index, each constituent is screened across all factors on a quarterly basis, helping to ensure that the strategy’s factor diversification is maintained. For those clients who don’t believe that they can add value by timing factors and don’t want to risk being overweight in the wrong factor at the wrong time, this provides a potential solution,” he said.

High Active Share Portfolio

Rafi Aviav, WisdomTree Head of Product Development in Europe, said, “While there is room for multi-factor strategies that offer a near-market experience and try to keep a very low tracking error with respect to their benchmark, USMF takes a different approach. It packages a high active share portfolio with significant factor exposures that are well balanced across the leading equity risk factors. Our high active share is achieved despite the strategy’s sector-neutrality, which ensures excess returns are consistently and purely driven by the strategy’s stock selection.”

“Furthermore, the factor exposures are pronounced and well-balanced across the leading risk factors, as opposed to many offerings which overload on value or momentum or have faint exposures across all factors. This all combines to makes the strategy’s added value potent, transparent and fee-efficient.”

“We believe USMF offers a much-needed, refreshing take on multifactor investing in today’s market, and we believe that investors will find this approach appealing,” he concluded.

US Multifactor UCITS ETF: Under the hood

The WisdomTree US Multifactor Index methodology incorporates the following:

  • Composite factor score: The starting universe of 800 US stocks ranked by market capitalization are assigned scores for two fundamental factors (value and quality) and two technical factors (momentum and low correlation). Stocks are assigned a composite factor score based on these four individual factor scores.
  • Volatility scoring: The top 200 companies with the highest composite multifactor scores are included in the index and assigned a volatility score based on the trailing 12-month period, rewarding less volatile stocks with higher scores.
  • Risk-adjusted weighting system: Individual stocks are weighted within the index by a combination, split evenly (50/50) of their composite factor score and their volatility score over the prior 12 months.
  • Quarterly rebalance: The ETF is rebalanced quarterly and the maximum weight of any individual security on rebalance is capped at 4%
  • Sector neutrality: In addition, the fund constrains sector bets by enforcing sector neutrality versus the market. These leads to any alpha generation coming from the multi-factor selection process and not from large sector deviations relative to the market capitalization-weighted universe.

Product Information:

 

Share Class Name Exchange Trading Currency Exchange Code ISIN
WisdomTree US Multifactor UCITS ETF - USD LSE USD USMF IE00BD8ZCY59
WisdomTree US Multifactor UCITS ETF - USD Acc LSE USD FCTR IE00BD8ZD313


Active share: Relates to the percentage of index holdings that are difference to those held by the benchmark.

Leading equity risk factors: There are many factors written about as sources of excess return premia, but the five most readily and widely accepted are: value, size, quality, momentum and low volatility.

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Notes to Editors

 

About WisdomTree UK Ltd.

 

WisdomTree Investments, Inc., through its subsidiaries in the US, Europe and Japan (collectively, "WisdomTree"), is an exchange traded fund ("ETF") and exchange traded product ("ETP") sponsor. WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies. Through WisdomTree UK Limited, it sponsors WisdomTree UCITS ETFs and ETPs from ETF Securities and Boost, in a wide range of asset classes, including short and leverage ETPs. WisdomTree currently has approximately $64.1 billion (as of 11 May 2018) in assets under management globally. For more information, please visit www.wisdomtree.com.

WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.

 

Disclaimer

 

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For Investors in France:

 

The information in this document is intended exclusively for professional investors (as defined under the MiFID) investing for their own account and this material may not in any way be distributed to the public. The distribution of the Prospectus and the offering, sale and delivery of Shares in other jurisdictions may be restricted by law. The Issuer is a UCITS governed by Irish legislation, and approved by the Financial Regulatory as UCITS compliant with European regulations although may not have to comply with the same rules as those applicable to a similar product approved in France. The Fund has been registered for marketing in France by the Authority Financial Markets (Autorité des Marchés Financiers) and may be distributed to investors in France. Copies of all documents (i.e. the Prospectus, the Key Investor Information Document, any supplements or addenda thereto, the latest annual reports and the memorandum of incorporation and articles of association) are available in France, free of charge at the French centralizing agent, Societe Generale at 29, Boulevard Haussmann, 75009, Paris, France. Any subscription for Shares of the Fund will be made on the basis of the terms of the prospectus and any supplements or addenda thereto.

 

Index Disclaimer

 

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