WisdomTree has unveiled a new suite of actively managed ETFs providing capital-efficient access to core portfolio exposures.

Jeremy Schwartz, Global Head of Research at WisdomTree.

The WisdomTree Efficient Core ETF suite consists of three funds that combine US Treasury futures with US large-cap, global developed ex-US, and emerging market equities.

Listed on NYSE Arca, the ETFs are the WisdomTree US Efficient Core Fund (NTSX US), WisdomTree International Efficient Core Fund (NTSI US), and WisdomTree Emerging Markets Efficient Core Fund (NTSE US).

NTSX, NTSI, and NTSE come with expense ratios of 0.20%, 0.26%, and 0.32%, respectively.

Investors allocating to both equities and fixed income will typically do so in separate trades, requiring two separate outlays of capital.

Using leverage and a ‘return stacking’ framework that layers Treasury futures on top of a basket of equities, the ETFs provide these two exposures while enhancing capital efficiency.

For every $100 invested, each ETF will invest $90 in a broad, market-cap-weighted portfolio of the 500 largest equities within its target region.

The remaining $10 will be invested in income-producing, high-quality, short-term US money market securities that will be posted as collateral on futures contracts for an effective $60 of long US Treasuries exposure (consisting of a balanced allocation across two, five, ten, and 30-year US Treasury futures contracts).

Each ETF, therefore, offers $150 of total exposure to equities and US Treasury futures for every $100 invested, resulting in accounting leverage of 150%. WisdomTree will typically rebalance the ETFs if they deviate by more than 5% from their targeted allocation.

According to WisdomTree, the strategies offer numerous benefits including enhancing the efficiency of core asset allocation, increasing the tax efficiency of fixed income in taxable accounts, and freeing up capital to invest in non-core and diversifying assets.

Jeremy Schwartz, WisdomTree Global Head of Research, said: “High valuations in equities and bonds present a challenge and headwinds for traditional portfolio approaches in achieving investor goals. The WisdomTree Efficient Core ETFs are designed to help investors create capital-efficient equity and bond portfolio blends that have lower volatility or similar volatility as a standalone 100% equities allocation.”