WisdomTree has introduced a new fixed income ETF providing broad exposure to the US dollar-denominated bond market while seeking to enhance yield within set risk parameters.
Rick Harper, Chief Investment Officer, Fixed Income at WisdomTree.
The WisdomTree Voya Yield Enhanced USD Universal Bond Fund (UNIY US) has been listed on Nasdaq with an expense ratio of 0.15%.
Sub-advised by Voya Investment Management, the fund tracks the Bloomberg US Universal Enhanced Yield Index.
The index aims to achieve both a higher yield and a low tracking error with respect to its parent universe, the Bloomberg US Universal Index, which covers USD-denominated, taxable bonds that are rated either investment grade or high-yield.
The parent universe comprises Bloomberg’s US Aggregate Index, US Corporate High Yield Index, Investment Grade 144A Index, Eurodollar Index, US Emerging Markets Index, and the non-ERISA eligible portion of the Collateralized Mortgage Backed Securities Index.
The index’s construction methodology follows a rules-based approach which tilts the weights of the parent universe towards higher yielding segments of the market while controlling risk and tracking error. The methodology contains a three-step process for yield optimization:
Firstly, index constituents are divided into buckets across sector, country, maturity, and credit quality.
Secondly, to control risk and concentration while limiting turnover, a number of constraints are added with respect to tracking error, duration, sector, and portfolio turnover.
Lastly, the index uses an optimization process to reallocate weights across the buckets to maximize yield while adhering to the constraints. Rebalancing occurs on a monthly schedule.
Rick Harper, Chief Investment Officer, Fixed Income at WisdomTree, said: “Today marks another milestone in our relationship with Voya as we launch the WisdomTree Voya Yield Enhanced USD Universal Bond Fund, a collaborative effort reinforcing the demand for broad exposure to the entire US bond market and highlighting our commitment to pursue a better investment and financial experience through the quality of our products, solutions, and engagement.”
Michael Beckerman, Head of Client Solutions and Co-Head of Client Advisory & Consultant Relations at Voya Investment Management, added: “Together, we have designed a product that we believe is differentiated from the current market offering and is reflective of the growing demand for fixed income investments. Our shared belief in creating innovative client investment options is the cornerstone of our relationship with WisdomTree, and we look forward to continued success.”