A New Spin On The Old 60/40 Split

Some of the most traditional financial advice is to be 60 percent allocated to equities and 40 percent allocated to fixed income. A new exchange traded fund brings a fresh look to traditional asset allocation models.

The WisdomTree 90/60 U.S. Balanced Fund NTSX debuted last week as the second asset allocation ETF in WisdomTree's lineup. The original is the WisdomTree Balanced Income Fund WBAL, which debuted late last year.

What To Know

The new ETF invests in U.S. large-cap stocks and U.S. Treasury futures contracts, but the new ETF starts from a different view than the old school 60/40 equity/bond split.

“The WisdomTree 90/60 U.S. Balanced Fund (NTSX) is created by investing 90% of Fund assets in equities and 10% in short-term fixed income,” said WisdomTree. “The 60% bond exposure is achieved by overlaying Treasury futures contracts to achieve the net 90/60 target. Through this higher-efficiency portfolio, investors can devote a smaller percentage of their assets (66.6%) to core holdings while still pursuing their desired exposure.”

Why It's Important

NTSX implements non-traditional assets to the traditional 60/40 mix, a methodology that can enhance returns while potentially lowering a portfolio’s risk profile.

“In addition to helping potentially boost capital efficiency, we also believe that 90/60 provides investors with the ability to enhance returns with non-core assets such as long/short equities, risk parity, commodity trading advisors or true alternatives,” according to WisdomTree. “In other words, by deploying an overlay strategy to boost capital efficiency, a 90/60 strategy has the potential to enhance total returns while also helping to dampen volatility via alternatives.”

If NTSX deviates from the desired 90 percent equity/60 percent fixed income mix by 5 percent, WisdomTree will rebalance the fund back to the original allocations.

What's Next

The NTSX equity allocation is comparable to the S&P 500 with the largest sector exposures being technology, financial services and health care.

“NTSX offers a new and disruptive approach to asset allocation, which has traditionally been through 60/40 equity/bond portfolios that tend to be highly correlated to the equity market,” said Jeremy Schwartz, WisdomTree Director of Research. “In contrast to these more traditional portfolios, NTSX seeks to provide a more efficient way for investors to deploy their capital, resulting in the potential for enhanced total returns, reduced volatility and increased tax efficiency.”

NTSX's annual fee is 0.20 percent, or $20 on a $10,000 investment.

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