Although risks may have risen in many of these markets, we believe that bank loans and floating rate notes still have a place in many investor portfolios. However, striking the correct balance between income potential and credit risk may continue to be a challenge. By not taking on risk, investors miss out on the opportunity for higher levels of income. By taking on too much risk, investors may overextend themselves to risky borrowers. However, with the U.S. Treasury now entering the market, we believe that investors will have a new option for floating rate exposure with ample liquidity and transparent pricing that can serve as a risk-free benchmark for floating rate note issuance going forward.
WisdomTree Bloomberg Floating Rate Treasury Fund (USFR)
In order to provide yet another tool for investors to manage interest rate and credit risk, WisdomTree partnered with Bloomberg to create the WisdomTree Bloomberg Floating Rate Treasury Fund (USFR). As floating rate issuance from the Treasury continues to grow over time, the Fund will seek to track the price and yield performance of the Bloomberg U.S. Treasury Floating Rate Bond Index.
Fund Quick Facts
Ticker: USFR
Exchange: NYSE
Expense Ratio5: 0.20%, contractually waived to 0.15%
Structure: Open-end ETF. Registered under the Investment Company Act of 1940.
Objective: The Fund seeks to track the price and yield performance, before fees and expenses, of the Bloomberg U.S. Treasury Floating Rate Bond Index.
Primary Exposures: Floating rate Treasury notes
Duration Target: Determined by the reset frequency of the underlying securities in the index, currently one week.
1Sources: Bloomberg, WisdomTree, as of 12/31/13.
2Source: U.S. Department of the Treasury, 1/29/14.
3Sources: WisdomTree, Bloomberg, as of 12/31/13.
4Source: Bloomberg, as of 12/31/13.
5The Fund’s gross expense ratio of 0.20% and the net expense ratio of 0.15% reflect a contractual waiver of 0.05% through the Fund’s first year of operations.
Important Risks Related to this Article
Diversification does not eliminate the risk of experiencing investment losses. There are risks associated with investing, including possible loss of principal. Securities with floating rates can be less sensitive to interest rate changes than securities with fixed interest rates, but they may decline in value. The issuance of floating rate notes by the U.S. Treasury is new and the amount of supply will be limited. Fixed income securities will normally decline in value as interest rates rise. The value of an investment in the Fund may change quickly and without warning in response to issuer or counterparty defaults and changes in the credit ratings of the Fund’s portfolio investments. Due to the investment strategy of this Fund, it may make higher capital gain distributions than other ETFs. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile.