Industry Updates

WisdomTree adds multi-factor tilts to three equity ETFs

George Geddes

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WisdomTree is set to make changes to three equity ETFs by incorporating value, quality and momentum factors.

Effective 6 May, the update will impact the WisdomTree Emerging Markets Equity Income UCITS ETF (DEMR), the WisdomTree Europe Equity UCITS ETF (HEDJ) and the WisdomTree UK Equity Income UCITS ETF (WUKD).

The changes include a screening process that scores and ranks companies depending on the composite risk score which takes into consideration three risk factors; value, quality and momentum.

Currently, the weighting of the three ETFs are based on a company’s dividend yield screen – the regular annual dividend per share multiplied by the number of shares outstanding.

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The updated methodology will remove a company if it passes the screen but falls within the bottom 20% of the universe based on the composite risk score.

The ETFs will be weighted depending on the top 80% companies’ dividend yield while the top, middle and bottom thirds of companies ranked by their composite risk scores will have their weights adjusted by 150%, 100% and 50%, respectively.

This provides a tilt towards companies with stronger composite risk scores.

WisdomTree has also seen changes to its WisdomTree WTI Crude Oil ETC (CRUD) following its benchmark provider, Bloomberg, decided to roll its July contracts to September after recent volatility in the oil market caused one-month futures contracts to fall into negative territory.

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