Managed Futures ETF Makes Its Way Into WisdomTree Model Portfolios

Model portfolios offer advisors flexibility in the asset allocation process, and the models themselves can be flexible and dynamic.

Take the case of the Siegel-WisdomTree Longevity Model Portfolio. That model portfolio is designed to be a fresher take on the traditional 60/40 portfolio “by structurally allocating more toward equities over fixed income and tilting toward factors such as dividend yield and low P/E ratios to seek higher income generation and outperformance potential,” according to WisdomTree. “The models are strategic in nature but also reflect tactical tilts based on market conditions. The strategy may include both WisdomTree and non-WisdomTree ETFs.”

Proving it’s dynamic, the Longevity Model Portfolio recently added the WisdomTree Managed Futures Strategy (WTMF) to its roster, bringing alternative investments into the fold, complementing a position in the WisdomTree Enhanced Commodity Strategy Fund (GCC) in the process. With inflation rising, the addition of WTMF to the model portfolio could prove smart.

“For example, historically, when commodities have trended upward, managed futures have tended to go long commodities. Similarly, when commodities have experienced a sustained pullback, managed futures have historically tended to start taking short positions in commodities. This complements GCC well in instances when commodities may be on the downswing. More broadly, the dynamic long/short nature of WTMF allows it to seek to take advantage of both inflationary and deflationary regimes,” notes WisdomTree analyst Matthew Aydemir.

Earlier this year, WisdomTree shook things up with WTMF, adding a tactical equity model to the WTMF fold. That move is helping the fund outperform gold while damping volatility.

“Although it has only been a brief period since the WTMF restructure, we can see various instances when both GCC and gold have pulled back while WTMF has remained relatively stable. We observe that WTMF has had the lowest maximum drawdown following the restructure, which aligns with our view that one of the main purposes of alternatives should be to enhance the risk-adjusted return of a portfolio,” adds Aydemir.

WTMF’s impact on the Longevity Model Portfolio remains to be seen, but it could prove to be a shrewd addition that works well in the current market environment and beyond.

“This year we’ve seen that WTMF has exhibited significantly less volatility and downside risk than gold, while providing superior returns. The ability for WTMF to go long or short various asset classes may also help provide protection should a particular asset class enter a downturn. Overall, we believe the Siegel-WisdomTree Longevity Model Portfolio is in an excellent position to take advantage of the current market environment,” concludes Aydemir.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.