Wilshire Phoenix debuts with risk-managed gold strategy ETF

Feb 22nd, 2021 | By | Category: Commodities

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New York-based Wilshire Phoenix has made its ETF debut with the launch of a physical gold fund that tactically allocates to cash based on changes in equity and gold market volatility.

Bill Herrmann, Managing Partner at Wilshire Phoenix

Bill Herrmann, Managing Partner at Wilshire Phoenix.

The Wilshire wShares Enhanced Gold ETF (WGLD US) has listed on NYSE Arca and is seeded with $1.8 million in assets.

The fund seeks to outperform a stand-alone investment in gold and provide a less-volatile investment experience without the use of leverage or derivatives.

Bill Herrmann, Managing Partner at Wilshire Phoenix, commented: “The industry constantly touts innovation but often disappoints by failing to deliver any meaningful new products for investors. In contrast, WGLD offers all investors immediate access to an entirely distinct strategy and structure in a transparent and efficient manner.

“WGLD combines an institutional-like strategy with retail-level ease of access to offer a dynamic, first-of-its-kind ETF.”

Will Cai, Head of Wilshire’s wShares, added: “We took a hard look at the ETF landscape and saw plenty of opportunities to deliver an innovative product for investors. Many investors underestimate or get spooked by volatility which can lead to poor decision making. We wanted to limit some of that uncertainty with the creation of WGLD.”

Methodology

The fund tracks the Wilshire Gold Index, a proprietary index developed by Wilshire Phoenix and independently calculated by Frankfurt-based Solactive.

The index’s allocation is determined monthly using a rules-based model based on the realized volatility of the LBMA Gold Price PM and the S&P 500 over the past 45 days.

The index will be 100% allocated to gold when gold price volatility is low, regardless of the realized volatility in the S&P 500. However, when gold price volatility is increasing, the index may shift up to half its weight into cash. Higher allocations to cash will typically be associated with lower volatility in the S&P 500. During periods when volatility in the gold price and the S&P 500 are both high, the index is likely to be 100% allocated to gold.

The strategy showed its merits during 2020. The index essentially maintained 100% exposure to gold as bullion soared in the first half of the year but began tapering its exposure just as the gold price peaked in early August. As of 19 February 2021, the index has an 83.9% allocation to gold.

The fund comes with an expense ratio of 0.65% meaning investors will be paying a 48 basis point premium to access Wilshire Phoenix’s risk-managed approach compared to the lowest-cost gold ETFs, the $2.5bn Aberdeen Standard Physical Gold Shares ETF (SGOL US) and the $1.1bn GraniteShares Gold Trust (BAR US),  which cost 0.17%.

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