NTSX ETF: a groundbreaking move by WisdomTree for savvy European investors

WisdomTree has launched the WisdomTree US Efficient Core UCITS ETF (NTSX). NTSX, seeks to track the price and yield performance, before fees and expenses, of the WisdomTree US Efficient Core UCITS Index (the "Index") and has a total expense ratio of 0.20%. NTSX, listed today on Börse Xetra and Borsa Italiana, will be listed on the London Stock Exchange on 18 October 2023.

The index is designed to deliver a 90% exposure to large-cap US equities and 60% to US Treasury futures, effectively providing a leveraged, more capital-efficient alternative to the traditional 60/40 portfolio. The ETF represents the first of its kind in Europe.

The ETF invests 90% of its assets in a diversified basket of the 500 largest US companies, by market capitalization, that meets WisdomTree’s ESG (environmental, social, and governance) criteria. To help magnify the benefits of the asset allocation, a 60% exposure to US Treasury futures is then overlaid on top, using the remaining 10% of the portfolio as cash collateral for the futures. The futures portfolio consists of an equal-weight basket of five US Treasury futures contracts with maturities ranging from two to 30 years. The exposures are rebalanced quarterly.

The strategy behind the WisdomTree US Efficient Core UCITS ETF is grounded in academia and based on modern portfolio theory. Academics have long argued that the optimal portfolio for a given level of risk is a leveraged version of the portfolio that presents the best Sharpe ratio. By leveraging a traditional 60/40 portfolio, investors can receive a similar level of volatility present in a portfolio 100% allocated to equities but with the better Sharpe ratio of a 60/40 portfolio.

“We believe investors can look at this ETF as a core US equity replacement. WisdomTree’s US Efficient Core strategy can provide greater return enhancement, risk management and diversification potential versus a 100% equity portfolio. It may have similar volatility to a 100% equity allocation over market cycles, but our research shows it can help reduce drawdowns and potentially provide higher risk-adjusted returns too. Additionally, it can be used to replace a combination of stocks and bonds, in an effort to create a more efficient portfolio that frees up space for allocations to other diversifiers or alternative strategies, like broad commodities, gold or crypto assets.”

Pierre Debru, Head of Quantitative Research & Multi Asset Solutions, WisdomTree.

European investors can now access NTSX, already a successful strategy in the US, originally launched in 2018. WisdomTree US Efficient Core UCITS ETF will form part of WisdomTree's $1.1bn range of Efficient Core strategies.

“In challenging market environments, investors need access to more tools and solutions to help them achieve their investment objectives. Our US efficient core ETF can help investors create optimal portfolio blends and magnify portfolio exposures through the same concept that drives their asset allocation. WisdomTree was founded on providing investors with innovative exposures and we continue to focus on bringing products to market that add value to our clients and their portfolios.”

Alexis Marinof, Head of Europe, WisdomTree.