WisdomTree Emerging Markets Corp Bd ETF earns a Morningstar Medalist Rating of Neutral with strength in areas such as Process offset by weaker spots such as People. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The management team doesn't personally invest much alongside shareholders. This is a large contributor to the strategy's Below Average People Pillar. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in corporate bonds and B rated bonds compared with category peers. The strategy's parent organization earns the firm a Below Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

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 Emerging Markets Corp Bd Fd earns an Above Average Process Pillar rating.    The predominant contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.4 stars. Strong risk-adjusted performance also strengthens the process. This can be seen in 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. Lastly, the process is limited by the instability of talent across its parent firm. The firm's asset-weighted manager tenure of three years suggests it could do more to retain portfolio managers.

 Compared with other funds in the Emerging Markets Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity 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 significantly overweight corporate debt in recent years. In the latest month, the strategy has relatively overweighted corporate debt compared with its peers as well. Additionally, there's been an underallocation from B rated bonds over the past few years. Similarly, in recent months, the strategy also had less exposure to B rated bonds than peers. Finally, during the past few years, the fund leaned meaningfully towards debt with three- to five-year maturities. In this month, the strategy also leaned more towards debt with three- to five-year maturities compared with its peers.

 This strategy's 12-month yield is 5.1%, lower than its average peers' 5.9%. In addition, it has a 5.4% 30-day SEC yield (a measure similar to yield-to-maturity). While a lower yield may deliver less income, it also tends to indicate lower credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated BB.

Above Average

Process

WisdomTree Emerging Markets Corp Bd Fd earns a Below Average People Pillar rating. The team benefits from the strategy's costs, which rank in its category's cheapest fifth. A higher expense ratio reduces net returns, so low costs give this team an advantage. However, the rating is held back by the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of three years suggests it could do more to retain portfolio managers. The instability of its management team also weakens the team. The fund last saw a manager change two years ago.


The strategy is backed by Anthony A. Routh, the longest-tenured manager, who has been a listed portfolio manager for six years. The average Morningstar Rating of the strategies they manage is 4.5 stars, demonstrating excellent risk-adjusted performance relative to category peers. Despite having a small team, the two listed managers boast 11 years of listed portfolio management experience. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

Below 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.

Parent

WisdomTree Emerging Markets Corporate Bond Fund

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