WisdomTree makes European debut with launch of dividend-weighted ETFs on LSE

Oct 24th, 2014 | By | Category: Equities

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WisdomTree, the fifth largest sponsor of exchange-traded funds in the US, has announced the launch of its European UCITS ETF platform. The launch follows the acquisition of Boost ETP earlier this year.

WisdomTree debuts in Europe with launch of dividend-weighted ETFs on LSE

Nik Bienkowski, Co-CEO of WisdomTree Europe.

In keeping with its reputation as a pioneer of smart beta ETFs, the sponsor has made its debut in Europe with the launch of four fundamentally weighted ETFs providing exposure to large and small-cap US and European dividend-paying equities.

The four funds, which have been listed on the London Stock Exchange, track proprietary WisdomTree indices that are based on the premise that conventional market capitalisation-weighted indices contain a major flaw; namely, that as a stock’s price increases, its weight in the index increases and, conversely, as a stock’s price decreases, its weight in the index decreases. As a result, an index whose constituent weights are based on market capitalisation may overweight overvalued stocks and underweight undervalued stocks.

By contrast, the WisdomTree indices are weighted by the sum total of regular dividends paid. Historically, dividends have provided a majority of the stock market’s real return over time and, unlike other factors, are an objective measure unaffected by accounting treatments. Furthermore, dividends are a major factor in determining stock price and a useful gauge in determining company profitability and value. In today’s low-yield environment, dividend-weighted ETFs may boost portfolio income, whilst potentially also reducing portfolio risk, as measured by volatility.

Commenting on the launch, Jonathan Steinberg, New York-based CEO and President of WisdomTree Investments, said: “WisdomTree is a proven ETF innovator and a passionate ETF industry advocate. We are excited to bring our unique ETF focus and experience to this important market, where we seek to offer differentiated investment solutions backed by a veteran management team.”

Nik Bienkowski, Co-CEO of WisdomTree Europe, added: “We are extremely proud to be launching WisdomTree’s first UCITS ETFs in Europe. WisdomTree is founded on well-built indices, insightful research and a track record of innovation. In addition to Boost ETPs, which provide investors with a unique product set to hedge portfolios or enhance returns, WisdomTree ETFs are unique, tracking broad indices, with most backed by live track records of more than eight years.”

The funds and their underlying indices are as follows:

WisdomTree Europe Equity Income UCITS ETF (EEI)
The ETF tracks the WisdomTree Europe Equity Income Index, a fundamentally weighted index that measures the performance of companies with high dividend yields selected from the WisdomTree DEFA Index. At the index measurement date, companies within the WisdomTree DEFA Index that are listed on one of the major stock exchanges in Europe with market capitalizations of at least $200 million and that meet additional liquidity requirements are ranked by dividend yield. Securities ranking in the highest 30% by dividend yield are selected for inclusion. Companies are weighted in the index based on annual cash dividends paid.  Total Expense ratio (TER) 0.29%.

WisdomTree US Equity Income UCITS ETF (DHS)
The ETF tracks the WisdomTree US Equity Income Index, a fundamentally weighted index that measures the performance of companies with high dividend yields selected from the WisdomTree US Dividend Index. At the index measurement date, companies within the WisdomTree US Dividend Index with market capitalizations of at least $200 million and average daily trading volumes of at least $200,000 for the prior three months are ranked by dividend yield. Securities ranking in the highest 30% by dividend yield are selected for inclusion. The index is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share. TER 0.29%.

WisdomTree Europe SmallCap Dividend UCITS ETF (DFE)
The ETF tracks the WisdomTree Europe SmallCap Dividend Index, a fundamentally weighted index that measures the performance of the small-capitalization segment of the European dividend-paying market. The index is comprised of the companies that compose the bottom 25% of the market capitalization of the WisdomTree Europe Dividend Index after the 300 largest companies have been removed. Companies are weighted in the index based on annual cash dividends paid. TER 0.38%.

WisdomTree US SmallCap Dividend UCITS ETF (DESE)
The ETF tracks the WisdomTree US SmallCap Dividend Index, a fundamentally weighted index measuring the performance of the small-capitalization segment of the US dividend-paying market. The index is comprised of the companies that compose the bottom 25% of the market capitalization of the WisdomTree US Dividend Index after the 300 largest companies have been removed. The index is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share. TER 0.38%.

The ETFs are tradable in GBP, EUR and USD, and seek to distribute dividends on a quarterly basis. They are Irish-domiciled and physically replicated, with the underlying shares being held with State Street custodian bank. KCG is lead market maker.

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