ETF Spotlight: WisdomTree Managed Futures Strategy Fund (WDTI)

October 16th at 7:00am by Tom Lydon

ETF Spotlight on WisdomTree Managed Futures Strategy Fund (NYSEArca: WDTI), part of an ongoing series.

Assets: $223.4 million.

Objective: The WisdomTree Managed Futures Strategy Fund tries to deliver positive total returns in rising or falling markets. It is also designed to diversify a portfolio of stocks or bonds.

Holdings: The fund tracks the performance of the Diversified Trends Indicator, and holds a combination of futures contracts, including U.S. Treasury futures, currency futures, non-deliverable currency forwards, commodity futures, commodity swaps, U.S. government and money market securities. Holdings are reset at the end of each month and year.

What You Should Know:

  • WisdomTree sponsors the WDTI ETF.
  • WDTI has an expense ratio of 0.95%.
  • The fund is down 5.42% over the last month and down 6.82% over the past three months.
  • Asset allocations include: Commodities 50% and Financials 50%. Note the energy portion can be flat or long. When it is flat the weightings shift in all other holdings.
  • Sub-asset financial futures allocations include: Canadian dollar 1.00%, Australian dollar 2.00%, Swiss franc 2.00%, British pound 5.00%, U.S. Treasury notes 7.5%, U.S. Treasury bonds 7.5%, Japanese yen 12.00% and Euro 13.00%.
  • Sub-asset commodities allocations include: Light Crude 8.5%, Natural Gas 4.25%, RBOB 3.0%, Heating Oil 3.0%, Soybeans 5.0%, Corn 4.0%, Wheat 2.5%, Gold 3.5%, Silver 1.75%, Copper 5.0%, Live Cattle 3.0%, Lean Hogs 2.0%, Coffee 1.5%, Cocoa 1.0%, Cotton 1.0%, Sugar 1.0%.
  • “The underlying benchmark is a widely-used indicator designed to capture the economic benefit derived from rising or declining price trends in the markets for commodity, currency and U.S. Treasury futures,” according to WisdomTree.
  • “It attempts to profit by shorting contracts that have done poorly and going long on contracts that have done well, taking advantage of momentum,” Morningstar analyst Samuel Lee said. “WDTI has admirably remained uncorrelated to stocks and bonds and is only weakly correlated to commodities while maintaining positive returns.”
  • The fund “can go either long when a sector’s price is above its exponential seven-month moving average and short when it’s below its moving average,” Lee added.

The Latest News:

  • As of Oct. 10, WDTI was flat energy, short grains, industrial metals, precious metals and soft commodities futures; and long livestock contracts, reports Don Dion for TheStreet.
  • The fund is also long U.S. dollar and Japanese yen; but it is short the euro, Australian dollar, Swiss franc, Canadian dollar and British pound.
  • While the broader commodities market is showing a remarkable turnaround, WDTI is slow to capture this mid-month movement since the fund rebalances on a monthly basis.
  • “Given its current index weighting, WDTI appears to have taken the correct bets given the current market environment marked by pressing macro concerns and growth doubts,” Dion said. “Investors confident that the past few days of strength will translate into a long-term upward trend may want to hold off on jumping into WDTI until we can see what the next rebalance brings.”

WisdomTree Managed Futures Strategy Fund

For past stories in this series, visit our ETF Spotlight category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Tickers

WDTI