GLBY “employs a systematic, rules-based approach to enhance yield not only at the country level, but also at the global level, by taking advantage of opportunities between currencies,” according to WisdomTree. “The construction process also maintains a disciplined risk management process through currency hedging, tracking error constraints and sector and interest rate caps to broadly maintain the risk characteristics associated with a globally diversified portfolio.”
GLBY’s effective duration is 7.54 years, but investors are compensated for the potential interest rate risk with added yield potential.
“Through our approach to the Global Agg, when a variety of constraints focused on risk management were applied, the output of the index methodology resulted in a portfolio with an additional 69 basis points (bps) of income potential that retained a similar interest rate risk profile to that of the Global Agg,” according to WisdomTree.
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