WisdomTree launch global dollar unconstrained bond ETF

Jun 11th, 2015 | By | Category: Fixed Income

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WisdomTree, a leading provider of exchange-traded funds, has launched a new fund tracking the global dollar-denominated bond market while offering greater flexibility through an actively managed structure. The WisdomTree Western Asset Unconstrained Bond Fund (UBND) may be used to provide balanced core fixed income exposure to investors’ portfolios.

WisdomTree launch global dollar unconstrained bond ETF

The WisdomTree Western Asset Unconstrained Bond Fund is managed by Western Asset, a firm specialising in unconstrained bond strategies.

The ETF’s strategy is managed by Western Asset, a firm specialising exclusively in fixed income management, with 11 years of experience in unconstrained bond management, and a focus on value-based strategies.

Unconstrained fixed income strategies provide the investment manager with a mandate to deviate from traditional fixed income benchmarks. Greater flexibility is provided to base investment decisions on the current market environment, permitting over- or under-weighting of bond sectors, as well as varying the duration of the portfolio to maximise returns and better manage risk.

Rick Harper, Head of Fixed Income and Currency at WisdomTree, commented: “The fund seeks to provide exposure to the desirable characteristics of fixed income – income potential, diversification and risk reduction – while avoiding the undesirable – segments of bond markets with overvalued securities and unattractive risk-return trade-offs. And in the ETF structure, we’re providing daily transparency into an actively managed bond portfolio, so investors can see what they hold, not what they held.”

Although this is in essence an actively managed fund, there are guidelines in place to ensure that risk levels remain acceptable during the pursuit of value opportunities. These include targeting bond-like volatility between 3-5%, a focus on total returns that are independent of market movements, and careful management of the duration risk to the portfolio given the expected rate outlook.

Indeed unconstrained bond ETFs may provide superior value than traditional bond funds in a wide range of market conditions. This includes rates beginning to rise across the board after an extended period of low yields; the fund may pursue outright short duration strategies.

“Despite its name, unconstrained strategies are not undisciplined— a focus on risk is essential to management of these strategies. At its core, unconstrained investing allows the flexibility to allocate capital based on an independent assessment of value rather than the issuance patterns of the major constituents in an index. Traditional market-capitalisation weighted benchmarks reflect supply, not necessarily value,” said Mark Lindbloom, Western portfolio manager of the WisdomTree Western Asset Unconstrained Bond Fund.

Listed on the NASDAQ, the fund carries a net expense ratio of 0.55%.

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