A recent set of filings from WisdomTree outlines the firm’s plans for a full family of fundamental corporate bond ETFs. The six funds range from very broad approaches to very narrow slices of the U.S. corporate bond space.
The basic methodology followed by the funds screens out bonds with unfavorable fundamental characteristics and then scores the remaining companies based on their valuation and income characteristics, with a higher score leading to a higher weighting in the index. Individual issuer weights in the underlying indexes are capped between 2% and 5%, depending on the fund.
The ETFs and their characteristics are as follows:
- The WisdomTree Fundamental U.S. Corporate Bond Fund targets investment-grade bonds from U.S.-domiciled issuers with at least a year to maturity and $350 million in par outstanding, among other requirements.
- The WisdomTree Fundamental U.S. BBB Corporate Bond Fund is focused on bonds that are at the bottom of the investment-grade ratings range, just a step up from junk bonds. The holdings must have par amounts outstanding of at least $500 million.
- The WisdomTree Fundamental U.S. Short-Term BBB Corporate Bond Fund has the same approach as the previous fund, but instead of requiring that components have at least a year remaining to maturity, holdings for this fund are not allowed to have more than five years left to maturity.
- The WisdomTree Fundamental U.S. Short-Term Corporate Bond Fund methodology requires that its holdings each have at least $350 million in par outstanding and no more than five years to maturity.
- The WisdomTree Fundamental U.S. High Yield Corporate Bond Fund holdings must be rated as junk bonds by at least one of the major ratings agencies but not have experienced a recent or current credit event. Bonds must also have a par amount outstanding of at least $500 million.
- The WisdomTree Fundamental U.S. Short-Term High Yield Corporate Bond Fund has similar requirements as the above fund, but its minimum par amount outstanding is $350 million and its holdings must have maturities of less than five years.
The filings did not include expense ratios or tickers, and there was no mention of the exchanges the ETFs will list on.
Contact Heather Bell at [email protected].
