WisdomTree Investments announced today in a press release the launch of its newest fund, the actively managed WisdomTree Efficient Gold Plus Equity Strategy Fund (GDE). The fund utilizes an investment strategy that offers exposure to U.S. large-cap equity securities that are typically market cap-weighted alongside U.S.-listed gold futures contracts for capital efficiency.
GDE seeks to be a one-stop-shop for investors who currently diversify their equity exposures with an alternative asset, such as gold, in two separate funds. By combining that capital allocation into one fund, it allows for better efficiency and a way to hedge for inflation risks all at once.
“We are anticipating sustained elevated inflation over the next three to five years, and with historically low global interest rates and high inflation comes the need for diversification to hedge macro risks,” Jeremy Schwartz, global chief investment officer at WisdomTree, said in the press release. “We believe gold exposure is an important strategic diversifier for equity portfolios, but the challenge for long-term equity bulls has been a lack of desire to reduce core allocations to stocks to fund positions in gold.”
The GDE Effect
GDE overlays gold futures exposure on top of U.S. equities exposure; for every $100 invested into the fund, $90 goes to large-cap U.S. equities. In addition, gold futures are leveraged so that $90 worth of gold futures overlay the equity allocation and $10 is left for cash collateral that is used in high-quality, short-term U.S. money market securities with returns similar to U.S. Treasury bills.
The leverage of the gold futures equates to a strategy that is enhanced 1.8x since every $100 invested has $180 of exposure to both equities and gold futures. GDE can be used as a substitute for large-cap U.S. equity funds, multi-asset funds, or alternative strategies while offering a potential inflation hedge through gold futures.
“With GDE, investors can now add gold exposure on top of a traditional core stock allocation. In addition, GDE provides further leverage to our capital efficient suite of funds that started with stock and bond efficient combinations,” said Schwartz.
GDE has an expense ratio of 0.20% and is actively managed.
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