Increased confidence in WisdomTree Interest RtHdgUS Aggt Bd ETF's prospects relative to its Morningstar Category peers results in  an upgrade in this strategy's Morningstar Medalist Rating to Gold from Bronze. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in AAA rated bonds and debt with 20- to 30-year maturities compared with category peers. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm a Below Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. WisdomTree Interest RtHdgUS Aggt Bd Fd earns a High Process Pillar rating.    The main driver of the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.4 stars, also supports the rating. Noteworthy risk-adjusted performance also reinforces the process, as shown by the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk.

 Compared with other funds in the Nontraditional Bond Morningstar Category, this fund takes on significantly lower credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the category average, the managers have been overweight AAA rated bonds in recent years. In the latest month, the strategy has relatively overweighted AAA rated bonds compared with its peers as well. Additionally, there's been an overweight position in debt with 20- to 30-year maturities over the past few years. Compared with category peers, the strategy had more exposure to debt with 20- to 30-year maturities in the most recent month. Finally, during the past few years, the fund leaned meaningfully towards cash. In this month, the strategy also leaned more towards cash compared with its peers.

 This strategy has a modest 3.7% 12-month yield, lower than its average peers' 4.9%. It also has a 4.0% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, a lower yield comes with the benefit of less credit risk. The portfolio holds assets with a higher average surveyed credit quality of A, compared with the category average of BB, and it holds no non-investment-grade assets, despite the average peers' 24%. Strategies with lower credit risk can typically withstand market turmoil more effectively.

High

Process

WisdomTree’s team is good but unexceptional, earning the strategy an Average People Pillar rating. There are three managers listed on the fund: David Nieman, Gregg Lee, Nancy Rogers. The team is well equipped, with an average of 13 years of portfolio management experience. Together, they manage a total of five strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Average

People

WisdomTree is improving, but its shaky global fund lineup and uncertain trajectory hold its rating to Below Average. 

WisdomTree’s research organization has long been a strength. Under CIO Jeremy Schwartz, the team has generated creative, economically sound ideas and evolved them into investable products, like the efficient core series. A recent focus on investor education spawned the Portfolio Analysis Tools Hub, an online platform that taps the team’s brainpower to help investors make better investment decisions.

The firm’s product lineup is a mixed bag. To complement its core lineup of fundamentally weighted strategies, WisdomTree has recently launched funds targeting established factors instead of trendy themes—an encouraging reorientation. Yet the shutdown of WisdomTree U.S. Growth and Momentum ETF calls WisdomTree’s commitment to these funds into question, and vestiges from its laxer product-development era look ripe for closure. Its European lineup features risky trading tools that are hard for investors to use well. 

WisdomTree’s future may hinge on WisdomTree Prime, its blockchain-based digital wallet. The launch reflects founder and CEO Jonathan Steinberg’s conviction in the disruptive potential of the blockchain. Prime shouldn’t hurt WisdomTree fund investors (most funds on the platform are zero-fee), but it may distract the firm from shoring up its core offering.

Below Average

Parent

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