WisdomTree has unveiled a new ETF in Europe delivering diversified exposure to 14 investment themes across technological, environmental, and societal megatrends.
Christopher Gannatti, Global Head of Research, WisdomTree.
The WisdomTree Megatrends UCITS ETF has been listed on London Stock Exchange in US dollars (WMGT LN) and pound sterling (WMGG LN) as well as on Deutsche Börse Xetra in euros (WMGT GY).
The fund is linked to the WisdomTree Global Megatrends Equity Index which selects its constituents from an initial universe of large and mid-cap stocks from developed and emerging market countries worldwide. A light ESG screen removes firms involved in certain controversial industries and those that violate international norms.
Leveraging WisdomTree’s proprietary thematic research, the ETF is built around three layers of alpha generation – strategic thematic asset allocation, tactical thematic asset allocation, and thematic stock selection.
The first layer, the strategic thematic asset allocation, provides investors with a curated exposure to the most promising themes while maximizing diversification between the themes across different megatrends.
The 14 investment themes currently being targeted in the portfolio include Artificial Intelligence & Big Data, Blockchain, Cloud Computing, Cybersecurity, Digital Infrastructure, HealthTech, Semiconductors, Sustainable Energy Production, Sustainable Energy Storage, Sustainable Food, Sustainable Resource Management, Aging Population, Rise of the Emerging Market Consumer, and Rise of the Middle Class.
The second layer, the tactical thematic asset allocation, allows the ETF to lean in and overweight certain strategies when a combination of positive factors creates a virtuous cycle for a given theme, as observed with cloud computing during 2020 and artificial intelligence in 2023.
The third layer, the thematic stock selection, leverages WisdomTree’s expert research partners to select the most relevant up-and-coming companies for each theme.
Finally, the methodology utilizes a momentum filter to reduce the portfolio to around 600 stocks by focusing on the companies with the highest momentum within each theme.
Within each theme, constituents are weighted using a combination of market capitalization and companies’ revenue attributable to the relevant themes. The index is rebalanced every quarter.
The fund comes with an expense ratio of 0.50% and is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
Chris Gannatti, Global Head of Research, WisdomTree, commented: “Building a multi-thematic portfolio can be challenging as there are many pitfalls that can lead to sub-par results. An overly concentrated portfolio, a lack of control around the allocation between themes, a lack of focus on smaller, high-potential companies, or a lack of discipline and theme expertise in stock selection can all diminish or even erase the impact of thematic investments. Our approach to building this multi-thematic strategy provides a value-added solution to investors’ toolkits. Through the strategy, investors can gain exposure to the most important and transformative themes, benefit from short-term trends in thematics, maximize diversification between themes and growth potential, while minimizing exposure to mega caps through a focus on pure play up-and-coming companies.”