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 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 with low financial leverage and strong returns on equity. 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

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Shift4 Payments

Ventia Services Group Lld

Avangrid

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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 main driver of 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 five-year risk-adjusted success ratio of 61% also supports the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their noteworthy success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the experience of the management team, which averages five years at this fund.

 This strategy prefers smaller market-cap firms compared with the average fund in its peer group, the Foreign Small/Mid Value Morningstar Category.  But in terms of style (value/growth) exposure, it is similar. Examining additional factor exposure, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in 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. Such holdings could cause it to trail peers during economic booms, but help it better withstand busts. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. Higher-yield stocks can provide steady income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. 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 6.4 and 6.2 percentage points, respectively. The sectors with low exposure compared to category peers are energy and healthcare, underweight the average by 5.5 and 3.4 percentage points of assets, respectively. The strategy owns 892 securities and its assets are more dispersed than peers in the category. In particular, 6.1% of the portfolio's assets are concentrated in the top 10 fund holdings, compared to the category average's 13.8%. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.

Above Average

Process

WisdomTree’s team is good but unexceptional, earning the strategy an Average People Pillar rating. There’s a sizable bench of five managers listed on the fund. Together, they manage a total of 111 strategies, with a Silver 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 an exchange-traded fund provider whose proprietary indexes underpin many of its funds. After the firm's core lineup of fundamentally weighted funds lost its luster in a difficult value environment, WisdomTree faces an identity crisis.

WisdomTree has plugged the holes in its value-oriented lineup with trendy thematic funds. Offerings that aim to capitalize on hot topics like cloud computing and genetic advancement fall outside the firm's realm of expertise and look like Band-Aids to curb outflows, not well-vetted long-term investments. Predictably, this point-and-shoot product-development approach had led WisdomTree to shut down funds at a lofty rate.

Bucking an industrywide, investor-friendly trend, WisdomTree has modestly trimmed fees on just a handful of funds. Such stubbornness calls into question whether the publicly traded firm prioritizes fundholders' or shareholders' interests. Recent inflows have helped, but severe outflows over the late 2010s have weakened the firm's financial position over the past several years.

The firm's research organization remains a highlight. Despite scattershot product launches, the team has demonstrated the ability to also hatch economically sound ideas and develop them into practicable products, like its funds that mechanically exclude state-owned enterprises. 

WisdomTree's commitment to investor education is another plus. Its Advisor Solutions platform, launched in 2016, provides advisors with a wealth of resources, and recent partnerships with Onramp Invest and Gemini should help advisors navigate cryptocurrency complexity. WisdomTree can read its clients' needs, but its trendy fund lineup shows that it's too willing to cater to their wants. It retains its Below Average rating.

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

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)