Four corporate bond ETFs have been launched by WisdomTree as it looks to give investors the chance to capitalize on the performance of selected issuers in the US corporate bond market.
The four ETFs in question are: the WisdomTree Fundamental US Corporate Bond Fund; the WisdomTree Fundamental US Short-Term Corporate Bond Fund; the WisdomTree Fundamental US High Yield Corporate Bond Fund; and the WisdomTree Fundamental US Short-Term High Yield Corporate Bond Fund.
In launching the products, WisdomTree outlined in a statement how smart beta strategies have gained popularity among equity investors. However, Rick Harper, the head of fixed income and currency at WisdomTree, points out that most fixed income benchmarks still weight by market capitalization, effectively assigning the greatest weight to companies with the most debt.
“While investors may have recognized the shortcomings associated with cap-weighted fixed income, there hasn’t been urgency for an alternative,” he said.
“However, historically low yield levels and an increased sensitivity to interest rate risk have refocused investor attention. WisdomTree has created a suite of US corporate bond ETFs that take an alternative-and more intuitive-approach by screening for bonds with fundamentals and liquidity, then tilting toward those with attractive income and valuation characteristics.”
It is suggested that the WisdomTree US corporate bond ETF suite will use fundamental indicators to isolate and remove weaker and potentially troubled creditors followed by a liquidity screen and risk-adjusted income score to tilt market value. The valuation and income tilt complement the fundamental screening process by potentially helping to create a better balance between return and risk.