WisdomTree, an exchange traded fund provider known for its alternative international focus, launched an active U.S. dollar fund and five fixed-income strategies that mitigate interest rate risk.
The actively managed WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEArca: USDU) will try to outperform the Bloomberg Dollar Spot Index through the use of short-term, investment grade instruments, according to a press release. USDU has a 0.50% expense ratio.
The managers will position for a strong U.S. dollar against approximately ten developed and emerging market currencies and no more than 20 currencies, with the euro expected to represent the largest exposure. The fund is not expected to outperform if the value of the basket of global currencies appreciates against the U.S. dollar.
“The US dollar’s value continues to evolve with new economic relationships and changing market dynamics,” Luciano Siracusano, WisdomTree Chief Investment Strategist, said in the press release. “We believe both trade flows and market liquidity define the value and role of the U.S. dollar in the global economy. By Benchmarking our fund to Bloomberg’s Index, USDU provides investors with a tool to participate in an environment where the U.S. dollar is rising relative to other currencies.”
According to a separate press release, WisdomTree also launched two aggregate bond and two high-yield bond ETFs for investors interested in interest rate driven solutions.
The WisdomTree Barclays U.S. Aggregate Bond Zero Duration Fund (NYSEArca: AGZD) will include exposure to Barclays U.S. Aggregate Bond Index while trying to manage interest rate risk through short positions in U.S. Treasuries. AGZD has a 0.23% expense ratio.
The WisdomTree Barclays U.S. Aggregate Bond Negative Duration Fund (NYSEArca: AGND) also includes exposure to the Barclays U.S. Aggregate Bond Index and manages rate risk through shorting U.S. Treasuries, but the fund tries to achieve a negative duration. AGND has a 0.28% expense ratio.
While both utilize long/short positioning to achieve their target strategies, the “Zero Duration” ETF’s short portfolio will match the duration of the long portfolio, with a targeted total duration exposure of zero years.
In comparison, the “Negative Duration” ETF will include short positions with a duration that exceed the duration of the long side, providing a targeted total duration exposure of negative five years. By taking a heavier weight toward short positions, the fund should do better in a rising rate environment.
The negative duration is “designed to have greater returns than an equivalent non-interest rate hedged investment when U.S. Treasury rates are rising significantly.”
Additionally, the WisdomTree BofA Merrill Lynch High Yield Bond Zero Duration Fund (NYSEArca: HYZD) will go long the BofA Merrill Lynch 0-5 Year U.S. High Yield Constrained Index and short U.S. Treasuries to maintain a portfolio with a zero duration. HYZD has a 0.43% expense ratio.
The WisdomTree BofA Merrill Lynch High Yield Bond Negative Duration Fund (NYSEArca: HYND) will also take a long exposure to the BofA Merrill Lynch 0-5 Year U.S. High Yield Constrained Index and short U.S. Treasuries, but the fund will have a targeted duration of negative seven years. HYND has a 0.48% expense ratio.
“With interest rates at historic lows, the values of traditional fixed income portfolios may be vulnerable to losses should rates increase in the future,” Rick Harper, WisdomTree’s Head of Currency and Fixed Income, said in the press release. “The WisdomTree Rising Rates ETFs allow fixed income investors to maintain traditional allocations while providing greater flexibility to manage interest rate risk.”
Lastly, the WisdomTree Japan Interest Rate Strategy Fund (Nasdaq: JGBB) tries to reflect the performance of the WisdomTree Japan Interest Rate Strategy Index, which provides long exposure to monthly U.S. Treasury Bill returns plus short exposure to monthly performance of Japanese government bonds, or JGBs, while also partially offsetting fluctuations in the Japanese yen against the U.S. dollar. The fund will benefit from a weakening yen and rising rates in Japan. JGBB has a 0.5% expense ratio.
“The Bank of Japan (BOJ) has overtly targeted a 2% inflation target and unveiled an extensive quantitative and qualitative monetary easing program designed to stimulate Japan’s economy,” Harper added. ” The BOJ’s bond buying may be able to compress these JGB rates in teh short term, but according to BOJ Governor Kuroda, interest rates should eventually rise if the BOJ accomplishes its goal.”
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