Wisdom Tree Defends Product in Opalesque

We’ve written in the past about Wisdom Tree’s Managed Futures Strategy Fund (WDTI) and our hangups with the product. We ruffled enough feathers to get a direct response to our criticisms, and now, chief investment strategist and co-founder Luicano Siracusano has defended the fund to Opalesque. We were eager to gain more insight into the offering, but unfortunately, found some of the answers a little lack luster. Some nuggets from the interview included:

“We looked for a way to create an ETF that is not correlated with US stocks and US bonds.”

Not something correlated with managed futures ? That’s what the name implies…

“Technically this is not an index fund.”

So it is not tracking the managed futures index? Again, what about the name of the product?

In the past eight years the DTI benchmark has outperformed US stocks, US bonds and some of the long-only commodity indexes including the Goldman Sachs index.

What about its performance compared to the managed futures indices?

“…some CTAs may be interested in our ETF as a way to put their cash to work when they’re in between rolling positions and want to get the returns that correspond to trend following strategies.

No CTA worth a darn is going to take on unknown risk on a model not of his/her own design. In addition, we’re not sure he understands that the bulk of CTAs manage ‘futures accounts’… through which you can’t buy ETFs in…

We respect the folks at Wisdom Tree, and aren’t really trying to pick a fight. But these interview answers confirm what we’ve been saying all along.  Naming your product a ‘managed futures ETF’ heavily implies that it is designed to track managed futures. But by the CIO’s own admission, it was deisgned to be non-correlated to stocks and bonds, not to be correlated to managed futures, and is not an index fund (meaning it doesn’t track an index).  All we’re saying is that this product isn’t likely to track alongside managed futures very well moving forward (and hasn’t in the past), and, because of that, is poorly named. It should be re-named ‘single trend following model ETF’ or something similar, instead of misleading people into thinking they are getting managed futures exposure.

2 comments

  1. I agree, and they are not the only ones. Only 6 out of 14 supposed managed futures mutual funds that I reviewedreally provided managed futures exposure. If I recall correctly, your blog has previously mentioned a couple of others that do not – the two Rydex funds.

  2. Absolutely correct. For us, it’s a lot about the presentation of the project.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.