Some exchange traded funds purport to deliver efficient core exposures, but that’s a mission the WisdomTree U.S. Efficient Core Fund (NTSX) lives and breathes.
Actively managed, NTSX puts a new, more relevant spin on the old 60/40 equity/fixed income split by employing a “90/60 Efficient Core” strategy that features exposure to the 500 largest domestic stocks and Treasury futures contracts. In straightforward terms, that’s a highly efficient structure.
“Put simply, if you have $100 to invest, you can invest $67 of that into NTSX and have the equivalent exposure to $100-worth of an S&P 500/Treasury portfolio, leaving you with $33 left to explore more alpha-seeking, yield-seeking or diversifying exposures within your overall portfolio,” said WisdomTree’s Scott Welch and Joseph Tenaglia in a recent note.
With NTSX, an investor gains $10 of equivalent short-term T-bill exposure for every $100 allocated to the fund. That’s an efficient avenue for putting cash to work while generating a modest level of income and some protection from equity market volatility.
More NTSX Perks
“The average effective duration for the fixed income portion of NTSX will typically be 7–7.5 years and is generally meant to offer the duration profile of traditional aggregate bond indexes,” note Welch and Tenaglia.
That puts NTSX’s bond exposure in intermediate-term territory, and that’s a positive for investors because intermediate-term Treasuries do what their longer duration counterparts often don’t: provide reduced correlations to stocks. Plus, intermediate-term government bonds often offer superior return profiles relative to short-term equivalents.
Speaking of reducing correlations, as Welch and Tenaglia note, investors can use the capital efficiencies created by NTSX to allocate to strategies that further enhance a portfolio’s correlation capabilities. Ideas on that front include the WisdomTree Managed Futures Strategy (WTMF) and the broad-based WisdomTree Enhanced Commodity Strategy Fund (GCC).
Additionally, investors can leverage NTSX’s cash efficiencies to bolster income by considering allocations to assets such as master limited partnerships (MLPs), high-yield bonds, preferred stocks, and real estate investment trusts (REITs). Or, advisors and clients can go straight for growth.
“These thematic industries might include cloud computing, genomics, cybersecurity, fintech, online gaming/e-sports, etc. Advisors interested in this angle may want to explore the WisdomTree Disruptive Growth Model,” add Welch and Tenaglia.
The WisdomTree Disruptive Growth ETF Model Portfolio provides exposure to “thematic” megatrends, including cloud computing, e-commerce, fintech, and more. Holdings in that model portfolio include the WisdomTree Modern Tech Platforms Fund (PLAT).
For more news, information, and strategy, visit the Model Portfolio Channel.
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.