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Are WisdomTree Modern Alpha ETFs Attractive?

| | Posted in: Investing Expertise

Is the WisdomTree approach to exchange-traded fund (ETF) cost efficiency and performance potential (Modern Alpha) attractive? To investigate, we compare performance statistics of six WisdomTree ETFs, all currently available, to those of "easy substitute" (widely used and very liquid) benchmark ETFs, as follows:

  1. WisdomTree U.S. Total Dividend Fund (DTD), with SPDR S&P 500 ETF Trust (SPY) as a benchmark.
  2. WisdomTree U.S. Earnings 500 Fund (EPS), with SPY as a benchmark.
  3. WisdomTree Europe Hedged Equity Fund (HEDJ), with Vanguard FTSE Europe Index Fund ETF Shares (VGK) as a benchmark.
  4. WisdomTree Yield Enhanced U.S. Aggregate Bond Fund (AGGY), with iShares Core U.S. Aggregate Bond ETF (AGG) as a benchmark.
  5. WisdomTree U.S. Multifactor Fund (USMF), with iShares Russell Mid-Cap ETF (IWR) as a benchmark.
  6. WisdomTree 90/60 U.S. Balanced Fund (NTSX), with 60%-40% SPY-iShares 7-10 Year Treasury Bond ETF (IEF) as a benchmark.

We focus on average return, standard deviation of returns, compound annual growth rate (CAGR) and maximum drawdown (MaxDD), all based on monthly data. Using monthly dividend-adjusted returns for all specified ETFs since inceptions and for all benchmarks over matched sample periods through June 2020, we find that:

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