An incline in its Process Pillar rating is the primary driver of WisdomTree Emerging Markets Mltfctr's upgrade to a Morningstar Medalist Rating of Bronze from Neutral. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in liquidity exposure and volatility exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. 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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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. WisdomTree Emerging Markets Mltfctr Fund earns an Above Average Process Pillar rating. 

The leading factor in the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 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 parent firm's five-year retention rate of 77%, which suggests it could do more to hold onto its portfolio managers.

 This strategy skews toward smaller, deeper value companies than its average peer in the Diversified Emerging Mkts Morningstar Category. Looking at 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. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. Additionally, the managers have tended to overweight yield, shown by the portfolio's high exposure to stocks paying dividends or buying back shares. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts 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 utilities and industrials relative to the category average by 4.2 and 3.3 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and communication services, underweight the average by 6.3 and 2.6 percentage points of assets, respectively. The portfolio is positioned across 216 holdings and its assets are more dispersed than peers in the category. In particular, 20.5% of the strategy's assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 25.4%.

Above Average

Process

WisdomTree Emerging Markets Mltfctr Fund earns an Average People Pillar rating. Marlene Walker-Smith, the longest-tenured manager on the strategy, boasts 12 years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 3.5 stars, demonstrating above-average risk-adjusted performance. Marlene Walker-Smith has an adequate backdrop of support, drawing on four additional listed managers, averaging five years of listed portfolio management experience. As a team, they manage 114 investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate. The team has not run into any turnover issues, with similar management retention to peers. The most recent documented departure was within the past two years. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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 Emerging Markets Multifactor Fund

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