WisdomTree has launched its first multi-factor exchange-traded fund (ETF).
The WisdomTree US Multifactor fund (USMF) tracks the WisdomTree Multifactor index and has an expense ratio of 28 basis points.
The index begins with a universe of 800 US stocks and scores them based on value, quality, momentum and correlation.
The top 200 companies with the highest multifactor scores are then assigned a volatility score based on the last 12 months before they are weighted by a combination of factor and volatility scores.
It is generally neutral on sectors and rebalanced quarterly with a maximum weighting towards any single security of 4%.
Luciano Siracusano, chief investment strategist at WisdomTree, said: ‘For investors willing to assume higher tracking error relative to traditional market capitalization weighted benchmarks, a multi-factor approach, such as the WisdomTree US Multifactor fund, has the potential to enhance returns, while providing greater factor diversification and thus, may lower volatility compared to single-factor approaches.’
WisdomTree currently has $43.5 billion in assets under management.