WisdomTree Investments bolstered their ETF roster today, launching two transparent actively-managed multifactor ETFs, the WisdomTree Emerging Markets Multifactor Fund (NYSEArca: EMMF) and the WisdomTree International Multifactor Fund (NYSEArca: DWMF).
EMMF seeks returns via ta transparent actively-managed strategy that invests in emerging market equity securities that have the highest potential for returns based on proprietary measures of valuation, quality, momentum and volatility reduction factors. DWMF uses a transparent actively-managed strategy, investing in developed market equity securities, excluding the U.S. and Canada, that have the highest potential for returns based on proprietary measures similar to EMMF.
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Both funds manage currency risk through a dynamic currency hedging strategy. EMMF has a net expense ratio of 0.48% DWMF has a net expense ratio of 0.38%.
“Actively managed strategies are an exciting new frontier for ETFs,” said Jeremy Schwartz, WisdomTree Director of Research. “We believe our Modern Alpha approach represents a new breed of strategies that incorporate the pursuit of outperformance with the benefits of the ETF structure.”
Like the WisdomTree U.S. Multifactor Fund (BATS: USMF), EMMF and DWMF both utilize a proprietary investment strategy which includes a mix of fundamental and technical factors that create a proprietary stock selection and weighting model. The approach involves screening a broad universe of stocks based on a composite multifactor score, a volatility score, and sector and country overweight and underweight bands to create a high active share portfolio in pursuit of outperformance.
“There are many higher-cost actively managed funds that tend to hug the benchmark with modest tilts toward active picks. In contrast, EMMF and DWMF are expected to have an active share greater than 80%, and we believe these differentials, combined with our multifactor model, create an opportunity to add value over time,” Schwartz added.
Developed and emerging market currencies exhibit different liquidity, risk and hedging costs. As a result, both EMMF and DWMF will also incorporate a dynamic currency overlay, building upon the dynamic currency hedging strategies WisdomTree ETFs already use, but with an active approach to evaluating and implementing currency hedge ratios.
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