WisdomTree has joined the multi-factor smart beta exchange traded fund game after rolling out its first U.S.-focused equity play that screens for various time-tested variables to potentially enhance returns and diminish drawdowns.
WisdomTree recently launched the WisdomTree U.S. Multifactor Fund (BATS:USMF), which comes with a 0.28% expense ratio.
The U.S. Multifactor Fund tries to reflect the performance of the WisdomTree U.S. Multifactor Index, which is generally comprised of 200 U.S. companies screened for fundamental factors value and quality, along with technical factors momentum and correlation.
Value is determined by fundamental valuation ratios, such as price-to-book, price-to-sales, price-to-earnings. Quality is determined by profitability ratios and the growth of these ratios over time, including return on equity and return on assets. Momentum is determined by a stock’s risk adjusted returns over multiple periods of time. Lastly, correlation is defined as each company’s correlation with a broad market index.