US-based ETF sponsor WisdomTree has launched an ETF with tracks the price of the company’s own Global Efficient Core Index.
The WisdomTree Global Efficient Core UCITS ETF, which listed today on Börse Xetra and Borsa Italiana and will list on the London Stock Exchange on 13 November, has a total expense ratio of 0.25%.
The index is designed to deliver a 90% exposure to large cap global developed equities and 60% to global government bond futures, effectively providing a leveraged, more capital efficient alternative to the traditional 60/40 portfolio.
The strategy behind WisdomTree’s Efficient Core ETF range is grounded in academia and based on modern portfolio theory.
Academics have long argued that the optimal portfolio for a given level of risk is a leveraged version of the portfolio that presents the best Sharpe ratio. By leveraging a traditional 60/40 portfolio, investors can receive a similar level of volatility present in a portfolio 100% allocated to equities but with the better Sharpe ratio of a 60/40 portfolio.
Pierre Debru, Head of Quantitative Research & Multi Asset Solutions, WisdomTree, said: “The efficient core concept aims to provide another powerful tool for investors to push the boundaries of what is possible to improve their portfolios.
“By combining the two main tools from the modern portfolio theory, diversification and leverage, it is possible to unlock even more efficient portfolios.
“The result is intended to be a portfolio that maintains a high correlation to the market for possible equity upside, with potentially lower volatility and drawdowns through greater fixed income exposure, while also allowing for allocations to other diversifiers or alternative strategies, like broad commodities, gold or crypto assets.”
