WisdomTree, begun trading 4 new U.S. Corporate Bond ETFs, the WisdomTree Fundamental U.S. Corporate Bond Fund (BATS: WFIG), the WisdomTree Fundamental U.S. Short-Term Corporate Bond Fund (BATS: SFIG), the WisdomTree Fundamental U.S. High Yield Corporate Bond Fund (BATS: WFHY) and the WisdomTree Fundamental U.S. Short-Term High Yield Corporate Bond Fund (BATS: SFHY) on Wednesday, April 27, 2016.
Here is a synopsis of the new ETFs:
1.
FUND INFORMATION:
| Symbol: WFIG | Exchange: BATS |
| Name: WisdomTree Fundamental U.S. Corporate Bond Fund | Net Expense Ratio: 0.18% |
FUND OBJECTIVE:
The WisdomTree Fundamental U.S. Corporate Bond Fund seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Fundamental U.S. Corporate Bond Index.
REFERENCE INDEX:
The WisdomTree Fundamental U.S. Corporate Bond Index is designed to capture the performance of selected issuers in the U.S. investment grade corporate bond market that are deemed to have favorable fundamental and income characteristics.
The Index employs a multi-step process, which screens based on fundamentals to identify bonds with favorable characteristics and then tilts to those which offer favorable income characteristics. The goal is to improve the risk-adjusted performance of traditional market capitalization-weighted approaches of corporate bond indices. The Index is comprised of corporate bonds of public issuers domiciled in the United States. To be eligible for inclusion in the Index, bonds must meet the following criteria:
(i) pay fixed-rate coupons; (ii) have at least $350 million in par amount outstanding; (iii) have a remaining maturity of at least one year; and (iv) rated investment grade (at least BBB- or Baa3) by Standard & Poor’s or Moody’s.
All bonds are denominated in U.S. dollars. The Index utilizes a “screen and tilt” rules-based approach to isolate bonds that have favorable fundamentals and tilts to those bonds with favorable income and valuation characteristics. Once the Index universe is defined from the eligibility criteria, individual bonds are assigned a factor score against their industry sector peers (industrials, financials and utilities) based on rules-based fundamental metrics distinguishing cash flow, profitability and leverage. Bonds are ranked within each sector based on factor score, and are then screened so that the lowest 20% factor scores in each sector are removed from the Index.
The remaining bonds are then assigned an income tilt score based on the probability of default and duration. The income tilt score is then applied within each sector to determine a bond’s weight in the Index, with bonds receiving higher income tilt scores within each sector more heavily weighted. Issuer exposure is capped at 5%, with excess exposure distributed to the remaining bonds on a pro-rata basis. The Index is rebalanced quarterly.
Fund’s Top 10 Holdings (04/26/16):
| Exxon Mobil Corporation 1.305% 3/6/2018 | 3.33% |
| Home Depot Inc 2.25% 9/10/2018 | 3.32% |
| Becton Dickinson And Co 1.8% 12/15/2017 | 3.31% |
| Time Warner Inc 3.6% 7/15/2025 | 3.30% |
| Wachovia Corp 5.75% 2/1/2018 | 3.29% |
| Dow Chemical Co/The 4.125% 11/15/2021 | 3.28% |
| Morgan Stanley 4.875% 11/1/2022 | 3.28% |
| Verizon Communications 4.4% 11/1/2034 | 3.22% |
| Bear Stearns Cos LLC 6.4% 10/2/2017 | 3.21% |
| Citigroup Inc 5.5% 9/13/2025 | 3.01% |
Useful Links:
WFIG Home Page
Category: Bonds> US Bonds> US Investment Grade Corporate Bonds
2.
FUND INFORMATION:
| Symbol: SFIG | Exchange: BATS |
| Name: WisdomTree Fundamental U.S. Short-Term Corporate Bond Fund | Net Expense Ratio: 0.18% |
FUND OBJECTIVE:
The WisdomTree Fundamental U.S. Short-Term Corporate Bond Fund seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Fundamental U.S. Short-term Corporate Bond Index.
REFERENCE INDEX:
The WisdomTree Fundamental U.S. Short-term Corporate Bond Index is designed to capture the performance of selected issuers in the short-term U.S. investment grade corporate bond market that are deemed to have favorable fundamental and income characteristics.
The Index employs a multi-step process, which screens based on fundamentals to identify bonds with favorable characteristics and then tilts to those which offer favorable income characteristics. The goal is to improve the risk-adjusted performance of traditional market capitalizationweighted approaches of corporate bond indices. The Index is comprised of corporate bonds of public issuers domiciled in the United States. To be eligible for inclusion in the Index, bonds must meet the following criteria:
(i) pay fixed-rate coupons; (ii) have at least $350 million in par amount outstanding; (iii) have a remaining maturity of at least one year and at most five years; and (iv) rated investment grade (at least
BBB- or Baa3) by Standard & Poor’s or Moody’s. All bonds are denominated in U.S. dollars.
The Index utilizes a “screen and tilt” rules-based approach to isolate bonds that have favorable fundamentals and tilts to those bonds with favorable income and valuation characteristics. Once the Index universe is defined from the eligibility criteria, individual bonds are assigned a factor score against their industry sector peers (industrials, financials and utilities) based on rules-based fundamental metrics distinguishing cash flow, profitability and leverage. Bonds are ranked within each sector based on factor score, and are then screened so that the lowest 20% factor scores in each sector are removed from the Index.
The remaining bonds are then assigned an income tilt score based on the probability of default and duration. The income tilt score is then applied within each sector to determine a bond’s weight in the Index, with bonds receiving higher income tilt scores within each sector more heavily weighted. Issuer exposure is capped at 5%, with excess exposure distributed to the remaining bonds on a pro-rata basis. The Index is rebalanced quarterly.
Fund’s Top 10 Holdings (04/26/16):
| Abbvie Inc 1.75% 11/6/2017 | 6.13% |
| HSBC USA Inc 1.625% 1/16/2018 | 3.27% |
| IBM Corp 5.7% 9/14/2017 | 3.27% |
| Amgen Inc 2.125% 5/15/2017 | 3.24% |
| AT&T Inc 5.50% 02/01/2018 | 3.24% |
| United Technologies Corp 6.125% 2/1/2019 | 3.24% |
| Wells Fargo & Company 1.4% 9/8/2017 | 3.24% |
| Phillips 66 2.95% 5/1/2017 | 3.23% |
| Lockheed Martin Corp 2.5% 11/23/2020 | 3.23% |
| Bank Of America Corp 7.625% 6/1/2019 | 3.18% |
Useful Links:
SFIG Home Page
Category: Bonds> US Bonds> US Investment Grade Corporate Bonds
3.
FUND INFORMATION:
| Symbol: WFHY | Exchange: BATS |
| Name: WisdomTree Fundamental U.S. High Yield Corporate Bond Fund | Net Expense Ratio: 0.38% |
FUND OBJECTIVE:
The WisdomTree Fundamental U.S. High Yield Corporate Bond Fund seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Fundamental U.S. High Yield Corporate Bond Index.
REFERENCE INDEX:
The WisdomTree Fundamental U.S. High Yield Corporate Bond Index is designed to capture the performance of selected issuers in the U.S. non-investment-grade corporate bond (junk bonds) market that are deemed to have favorable fundamental and income characteristics. The Index employs a multi-step process, which screens based on fundamentals to identify bonds with favorable characteristics and then tilts to those individual securities which offer favorable income characteristics. The goal is to improve the risk-adjusted performance of traditional market capitalization-weighted approaches of high-yield corporate bond indices.
The Index is comprised of corporate bonds of public issuers domiciled in the United States. To be eligible for inclusion in the Index, bonds must meet the following criteria: (i) pay fixed-rate coupons; (ii) have at least $500 million in par amount outstanding; (iii) have a remaining maturity of at least one year; (iv) rated non-investment grade by Moody’s or Standard & Poor’s.
In addition, the issuer cannot have defaulted or be in distress. For the purposes of the Index, bonds issued under Regulation S are excluded from eligibility. All bonds are denominated in U.S. dollars. The Index utilizes a “screen and tilt” rules-based approach to isolate bonds that have favorable fundamentals and tilts to those bonds with favorable income and valuation characteristics. Once the Index universe is defined from the eligibility criteria, individual bonds are assigned a factor score against their industry sector peers (industrials, financials, utilities, consumer and energy) based on rules-based fundamental metrics distinguishing cash flow characteristics and discards the securities with poor cash flow performance. Remaining bonds are ranked within each sector based on liquidity scores, and are then screened so that the lowest 5% liquidity scores in each sector are removed from the Index. The remaining bonds are then assigned an income tilt score based on the probability of default. The income tilt score is then applied within each sector to determine a bond’s weight in the Index, with bonds receiving higher income tilt scores within each sector more heavily weighted. Issuer exposure is capped at 2%, with excess exposure distributed to the remaining bonds on a pro-rata basis. The Index is
rebalanced semi-annually.
Fund’s Top 10 Holdings (04/26/16):
| L Brands Inc 6.625% 4/1/2021 | 3.28% |
| Centene Escrow Corp 5.625% 2/15/2021 | 3.26% |
| Alcoa Inc 6.15% 8/15/2020 | 3.25% |
| CHS/Community Health Sys 5.125% 8/15/2018 | 3.25% |
| MGM RESORTS INTL COMPANY GUAR 03/22 7.75 | 3.25% |
| HCA Inc 4.75% 5/1/2023 | 3.19% |
| Amerigas Finance LLC/Cor 7% 5/20/2022 | 3.19% |
| First Data Corporation 7% 12/1/2023 | 3.18% |
| Cablevision Systems Corp 7.75% 4/15/2018 | 3.05% |
| Centurylink Inc 6.75% 12/1/2023 | 2.95% |
Useful Links:
WFHY Home Page
4.
FUND INFORMATION:
| Symbol: SFHY | Exchange: BATS |
| Name: WisdomTree Fundamental U.S. Short-Term High Yield Corporate Bond Fund | Net Expense Ratio: 0.38% |
FUND OBJECTIVE:
The WisdomTree Fundamental U.S. Short-Term High Yield Corporate Bond Fund seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Fundamental U.S. Short-term High Yield Corporate Bond Index.
REFERENCE INDEX:
The WisdomTree Fundamental U.S. Short-term High Yield Corporate Bond Index is designed to capture the performance of selected issuers in the short-term U.S. non-investment-grade corporate bond (junk bonds) market that are deemed to have favorable fundamental and income characteristics.
The Index employs a multi-step process, which screens based on fundamentals to identify bonds with favorable characteristics and then tilts to those individual securities which offer favorable income characteristics. The goal is to improve the risk-adjusted performance of traditional market capitalization-weighted approaches of high-yield corporate bond indices. The Index is comprised of corporate bonds of public issuers domiciled in the United States. To be eligible for inclusion in the Index, bonds must meet the following criteria: (i) pay fixed-rate coupons; (ii) have at least $350 million in par amount
outstanding; (iii) have a remaining maturity of at least one year and at most five years; (iv) rated non-investment grade by Moody’s or Standard & Poor’s. In addition, the issuer cannot have defaulted or be in distress. For the purposes of the Index, bonds issued under Regulation S are excluded from eligibility. All bonds are denominated in U.S. dollars. The Index utilizes a “screen and tilt” rules-based approach to isolate bonds that have favorable fundamentals and tilts to those bonds with favorable income and valuation characteristics. Once the Index universe is defined from the eligibility criteria, individual bonds are assigned a factor score against their industry sector peers (industrials, financials, utilities, consumer and energy) based on rules-based fundamental metrics distinguishing cash flow characteristics and discards the securities with poor cash flow performance. Remaining bonds are ranked within each sector based on liquidity scores, and are then screened so that the lowest 5% liquidity scores in each sector are removed from the Index. The remaining bonds are then assigned an income tilt score based on the probability of default. The income tilt score is then applied within each sector to determine a bond’s weight in the Index, with bonds receiving higher income tilt scores within each sector more heavily weighted. Issuer exposure is capped at 3%, with excess exposure distributed to the remaining bonds on a pro-rata basis. The Index is rebalanced semi-annually.
Fund’s Top 10 Holdings (04/26/16):
| HCA Inc 8% 10/1/2018 | 3.16% |
| Gray Television Inc 7.5% 10/1/2020 | 3.15% |
| Transdigm Inc 5.50% 10/15/2020 | 3.15% |
| CNH Industrial Capital L 3.375% 7/15/2019 | 3.14% |
| Centene Escrow Corp 5.625% 2/15/2021 | 3.14% |
| Navient Corp 8% 3/25/2020 | 3.14% |
| Dcp Midstream Operating 2.50% 12/01/2017 | 3.13% |
| Nationstar Mort/Cap Corp 6.5% 8/1/2018 | 3.13% |
| Frontier Communications 8.875% 09/15/2020 | 3.12% |
| T-Mobile USA Inc 6.542% 4/28/2020 | 3.12% |
Useful Links:
SFHY Home Page
ETFtrack comment:
Here is a comment from Rick Harper, WisdomTree Head of Fixed Income and Currency:
“While investors may have recognized the shortcomings associated with cap-weighted fixed income, there hasn’t been urgency for an alternative. However, historically low yield levels and an increased sensitivity to interest rate risk have refocused investor attention. WisdomTree has created a suite of U.S. 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.
We went back-to-basics and focused on what we believe investors truly want in their portfolios: quality bonds that pay an attractive level of income. WisdomTree’s approach represents the future of smart beta fixed income by combining the intuition of an active approach with the transparency and rigor of passive management.”