WisdomTree EmMkts ex-Stt-Ownd EntrprsETF’s management team is just 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 least expensive 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 yield exposure and an overweight in liquidity exposure compared with category peers. Low yield exposure is attributed to holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The team managing the passive strategy earns the strategy an Average People Pillar rating. To be considered a quality steward, this strategy's parent organization needs to improve factors like a lack of inside investments from portfolio managers and a cohort of unseasoned portfolio managers. As a result, the firm obtains a Below Average Parent Pillar rating.

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 EmMkts ex-Stt-Ownd Entrprs Fd earns an Above Average Process Pillar rating. The largest contributor to 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 five-year risk-adjusted success ratio of 61% also strengthens 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.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Emerging Markets ex-State-Owned Enterprises Index (the "index").  Under normal circumstances, at least 80% of the fund's total assets will be invested in component securities of the index and investments that have economic characteristics that are substantially identical to the economic characteristics of such component securities. The index is a modified float-adjusted market cap weighted index that consists of common stocks in emerging markets, and excluding common stocks of "state-owned enterprises." The fund is non-diversified. 

 The portfolio is overweight in consumer cyclical by 5.8 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and energy, with financial services underweighting the average portfolio by 6.0 percentage points of assets and energy similar to the average. The strategy owns 585 securities and is similarly diversified as peers, with 25.0% of portfolio assets concentrated within the top 10 holdings. And finally, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating 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 115 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 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 Emerging Markets ex-State-Owned Enterprises Fund

XSOE tracks a market-cap-weighted index of emerging market companies, excluding state-owned enterprises.

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