WisdomTree Dyn Ccy Hdgd Intl SmCp Eq ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in liquidity exposure and an overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. 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.

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. WisdomTree Dyn Ccy Hdgd Intl SmCp Eq Fd earns an Above Average Process Pillar rating. 

The most substantial contributor to the rating is that this fund tracks an index. Historical data, such as 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 bolsters the process. Lastly, the process is limited by the instability of management across its parent firm. The firm's asset-weighted manager tenure of three years suggests it could do more to retain portfolio managers.

 This strategy targets smaller plays than its peers’ average in the Foreign Small/Mid Value Morningstar Category. But in terms of investment style, it is on par with peers. Analyzing additional factors, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy also has had a position favoring high-quality stocks in recent years, which could contribute to higher downside risk protection. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it weather downturns better than Morningstar Category peers. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. In this month, the strategy also had more exposure to the Yield factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in industrials and real estate relative to the category average by 6.2 and 5.5 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and healthcare, underweight the average by 3.9 and 3.8 percentage points of assets, respectively. The portfolio is composed of 930 holdings and is diversified among those holdings. In its most recent portfolio, 7.1% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 13.6% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 48% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

WisdomTree’s  team is comparable to peers, resulting in an Average People Pillar rating. There’s a deep bench of five managers listed on the fund. Together, they manage a total of 113 strategies, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position 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

WisdomTree Dynamic Currency Hedged International SmallCap Equity Fund

DDLS tracks an index of dividend-paying developed-market small-cap equities outside the US & Canada, weighted by cash dividends. The index dynamically hedges currency exposure for USD investors based on three equal-weighted signals.

WisdomTree Dynamic Currency Hedged International Equity Fund

WisdomTree International SmallCap Dividend Fund

WisdomTree International Equity Fund

WisdomTree Japan Hedged Equity Fund

WisdomTree Emerging Markets Multifactor Fund

WisdomTree International Hedged Quality Dividend Growth Fund

WisdomTree International Multifactor Fund

By Liqian Ren, Director of Modern Alpha Key Takeaways Currency hedging is crucial for mitigating risks in global investing by managing foreign exchange fluctuations while preserving equity exposure. Our dynamic currency-hedged ETFs have proven to reduce portfolio risk through factor-based strategies.

Currency Hedging: A Tool to Reduce Risk

By Liqian Ren, Director of Modern Alpha The recent surge in the dollar, driven by geopolitical tensions and the unique role of the U.S. in international financial markets, has brought currency hedging into focus. Our strategic long-term orientation suggests that currency hedging should be a more frequent consideration when investing in foreign markets.

What Our Signals Say about U.S. Dollar Risk

Currency hedge value-add to returns was high over this period, but the risk reduction is what we would expect on a longer-run basis. The dynamic currency hedge contained in DDWM added almost 200 basis points per year over the last six years.

News for WisdomTree Dynamic Currency Hedged International SmallCap Equity Fund ETF (DDLS)