Investors are testing the market waters and considering how they will position for the year ahead before diving in head first.
On the upcoming webcast, Macro Strategies: Navigating Choppy Market Waters, Jeremy Schwartz, Executive Vice President and Global Head of Research at WisdomTree, and Kevin Flanagan, Senior Fixed Income Strategist for WisdomTree, will look to the macro market environment and consider equity and fixed-income strategies that could help diversify and enhance an investment portfolio in a more trying environment.
For example, the WisdomTree Barclays Yield Enhanced U.S. Short-Term Aggregate Bond Fund (BATS: SHAG) may be one way for investors to potentially enhance yield generation and diminish interest rate risk by targeting the shorter end of the U.S. Aggregate Bond universe.
SHAG tries to reflect the performance of the Bloomberg Barclays U.S. Short Aggregate Enhanced Yield Index, which captures the short-term U.S. investment-grade, fixed income securities market while seeking to enhance yield within desired risk parameters and constraints. The benchmark also uses a rules-based approach to re-weight subgroups to achieve higher yields and underweights low-yielding securities Treasuries, while managing risk through constraints on expected tracking error and turnover, as well as sector, duration, and credit exposure relative to the ST Agg Universe.
Another strategy to hedge against rate risk is through the WisdomTree Bloomberg Floating Rate Treasury Fund (NYSEArca: USFR), which follows the Bloomberg U.S. Treasury Floating Rate Bond Index, focuses on floating rate notes. Instead of paying a fixed rate of interest like other Treasuries, floating rate note coupon payments are based on a reference rate (90-day t-bills) plus a spread. Since 90-day bills are auctioned every week, the effective duration of floating rate notes is one week, which allows investors to capture higher rates of income as short-term rates rise. This also provides an opportunity for investors to boost income as the Federal Reserve hikes interest rates.
For the more risk tolerant investor whom are looking for greater yield opportunities but are still wary of rate risks, the WisdomTree Fundamental US Short-Term High Yield Corporate Bond (NasdaqGM: SFHY) tracks the WisdomTree Fundamental U.S. Short-term High Yield Corporate Bond Index. The index is designed to capture the performance of selected issuers in the short-term U.S. non-investment-grade corporate bond market that are deemed to have favorable fundamental and income characteristics.
Additionally, on the equity side, ETF investors can look to something like the WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ: DGRW) as a way to hone in on quality names and and still generate some extra cash on the side. DGRW includes companies with high long-term earnings-growth forecasts for the next three to five years and weights components based on the value of dividends they are expected to pay over the next year. The ETF is not heavily weighted to the rate-sensitive sectors that are often prominent in many yield-based dividend funds.
Financial advisors who are interested in learning more about investment strategies for the environment ahead can register for the Wednesday, February 20 webcast here.