WisdomTree Unveils Big Expansion To Fixed Income ETF Lineup

As the smart or strategic beta exchange traded funds movement has gained momentum, some ETF industry observers have wondered when that momentum would take hold in the fixed income space.

While the number of smart beta bond ETFs remains scant compared to alternatively-indexed equity offerings, that is starting to change and change came in big way Wednesday when WisdomTree Investments, Inc. WETF, the fifth-largest U.S. ETF issuer, introduced four smart beta corporate bond ETFs.

WisdomTree's newest fixed income offerings are as follows: The WisdomTree Fundamental U.S. Corporate Bond Fund WFIG, WisdomTree Fundamental U.S. Short-Term Corporate Bond Fund SFIG, WisdomTree Fundamental U.S. High Yield Corporate Bond Fund WFHY and the WisdomTree Fundamental U.S. Short-Term High Yield Corporate Bond Fund SFHY.

Related Link: ETFs For A Changing Fixed-Income Environment

WFIG

The WisdomTree Fundamental U.S. Corporate Bond Fund follows the WisdomTree Fundamental Corporate Bond Index. That benchmark “screens on fundamentals to identify bonds with favorable characteristics and then tilts to those which offer attractive income characteristics,” according to WidsomTree. WFIG only holds investment-grade debt. The new ETF's index tracks nearly 2,700 issues with an effective duration of 6.7 years.

SFIG

The WisdomTree Fundamental U.S. Short-Term Corporate Bond Fund uses a similar methodology as does the aforementioned WFIG. SFIG's underlying index holds just over 1,000 investment-grade issues with an effective duration of nearly 2.3 years. Over 90 percent of the new ETF's holdings are rated BBB or A.

WFHY

The WisdomTree Fundamental U.S. High Yield Corporate Bond Fund follows the WisdomTree Fundamental U.S. High Yield Corporate Bond Index, which only includes high-yield corporate debt “with at least $500 million in par amount outstanding and a remaining maturity of at least one year,” according to WisdomTree.

Over 91 percent of WFHY's nearly 780 issues are rated BB or B. The new ETF has an effective duration of 4.45 years. Over 44 percent of its issues hail from the communications and consumer discretionary sectors.

The WisdomTree Fundamental U.S. Short-Term High Yield Corporate Bond Fund is the short duration answer to the aforementioned WFHY. SFHY has an effective duration of just 2.44 years. Over 87 percent of the new ETF's 164 issues are rated BB or B.

SFHY

“For WFHY and SFHY focused on U.S. high-yield corporate bonds, the presence of negative cash flows over several years has provided a warning signal for speculative credits. The strategies focus on issuers exhibiting more favorable cash flow characteristics to mitigate downside risk and significantly reduce overall volatility,” said WisdomTree in a statement.

WisdomTree's new high-yield offerings charge 0.38 percent per year while the new investment-grade ETFs carry net expense ratios of 0.18 percent.