2Mo·

Efficient Core by Wisdomtree

Has anyone ever dealt with the $NTSG (+0,1 %) or $WTEF (+0,05 %) has anyone looked into it? At first glance, it would probably not be a bad investment compared to a 100% equity portfolio. (Especially the younger one $NTSG (+0,1 %) ).

To what extent would this be suitable for people with less of an affinity for risk? For example, in comparison to 80% stocks 20% bonds

For those who don't know it yet:

quite simply (I can't say much more than that) the etf has two shares. An equity component and a bond component.

90% equities

60% bonds.

for those who know math and think "you idiot miscalculated, that's 150%!" the 60% bond exposure is leveraged via rolling futures.

Of course, the low capitalization of the ETF has been problematic so far. There is a risk that it could be liquidated.

I haven't read into it that deeply yet. Therefore: does anyone know it? Any thoughts on it?

16 Commentaires

Epi@Epi

2Mo

This is essentially a 1.5x leveraged 60/40 portfolio. According to theory and backtests, you can have the performance of the stock market with the drawdown of a 60/40 portfolio.

The whole thing is called efficient core because the 1.5x leverage means you need less capital for the core and have more for the satellites to achieve the same effect.

Interesting concept for core-satellite investors. 👍

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Voir toutes les 9 autres réponses

Stulle 🥪@Stullen-Portfolio

2Mo

Yes, I find the construct very interesting in principle.
In particular, the fact that the lower-risk part (bonds) is leveraged and this is done in a comparatively low-risk way. @Epi has also summarized it very aptly.

So if you want to invest a portion in bonds, this would be my product of choice.

However, since I personally am far from being in a phase where I invest in bonds, taking into account all my boundary conditions, I do not need this product either....but that should not detract from my assessment of the product as such.

Greetings
🥪

Greetings

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Uwe@SchlaubiSchlumpf

2Mo

@Stullen-Portfolio I feel the same way. I find the product very attractive, but it would not be an option for me due to my factor affinity. But I think it's an interesting product for people who just want it. I just wanted to get your opinion as I know that you are similar to me and I value your opinion before I promote the product 😁

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Epi@Epi

2Mo

Addendum: I find the basic approach of the Efficient Core ETF problematic.
The idea is based on backtesting since around 1980 (white paper on Wisdomtree's website). This is a phase of low or steadily falling key interest rates. In these phases, 60/40 works because equities and bonds are then negatively correlated.
However, as soon as interest rates rise and inflation is >3%pa, this no longer works. Equities and bonds are then positively correlated. The efficient core concept then collapses.

Where are we now after 40 years of falling interest rates and inflation? Everyone is welcome to answer that for themselves. The answer will determine whether the efficient core makes sense or is hara-kiri. 🤔

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Uwe@SchlaubiSchlumpf

2Mo

I don't know if I would subscribe to it one hundred percent. In the EU we should slide back into the falling yield curve. But it depends on how many bonds the EU puts on the market. At the moment, higher interest rates are already priced in for the long term than for the short term. With the Americans, it also depends on what happens next. It feels like it can go either way at the moment. But I basically agree with you. There was cherry-picking here. Something like that would not have been nice in 2022.

Thanks for your assessment!

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Uwe@SchlaubiSchlumpf

2Mo

@Epi At present, the ETF is probably also so small that it could remain unsuccessful and be liquidated, which would result in tax disadvantages

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Uwe@SchlaubiSchlumpf

2Mo

@TotallyLost, @Stullen-Portfolio what do you think?

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