WisdomTree, the exchange-traded fund (“ETF”) and exchange-traded product (“ETP”) sponsor today announced the launch of the WisdomTree Enhanced Commodity UCITS ETF (accumulating) (Ticker: WCOA) on the London Stock Exchange along with a GBP distributing and accumulating share classes (WCOG/WCOB).
Viktor Nossek, Director of Research at WisdomTree Europe said:
“Investors are keen to incorporate broad commodity exposures in their portfolios due to the fact that it has low to negative correlations to other asset classes and therefore enhances portfolio diversification. The roll methodology in the WisdomTree Enhanced Commodity UCITS ETF substantially mitigates the costs of holding commodity futures contracts and has historically generated positive roll returns. This removes one of the main barriers to having a long term allocation to commodities, whilst the current macro environment is also supportive of increased exposure to this asset class. Across the various commodity sectors, fundamentals have improved; ranging from a steadier environment for the oil price, negative interest rates likely to benefit sentiment towards gold and a more positive view on emerging markets activity that may drive returns in industrial metals.”
Hector McNeil, Co-CEO of WisdomTree Europe commented:
“WisdomTree is pleased to continue bringing to market innovative solutions that provide various benefits to investors. The new Enhanced Commodity UCITS ETF offers a unique combination of exposure to broad commodities based on the underlying weights of the Bloomberg Commodity Index and enhanced roll returns. WisdomTree Europe has been successful in providing smart beta and alternatively weighted solutions in the equity space and is delighted to extend its smart approach to commodities which we believe is an important asset class.”
WisdomTree Enhanced Commodity UCITS ETF
The Fund is benchmarked against the EBCIWTT, which is an Optimised Roll Commodity Total Return index, which aims to outperform the Bloomberg Commodity Total Return Index over the long term through minimising contango and maximising backwardation. The Index consists of 22 commodities with sector exposures of 35.5% in agriculture, 30.9% in energy, 17% in industrial metals and 15.6% in precious metals.
Commodity futures contracts trade either in contango, where forward month futures contracts trade at a premium to the current month and hence there is a cost (negative roll yield), or in backwardation, where forward month futures contracts trade at a discount to the current month (positive roll yield).
The enhanced roll mechanism incorporated in the EBCIWTT aims to maximise the roll yield and minimise roll costs related to maintaining exposure to the commodities in the index. This is achieved through a rules based dynamic approach to rolling futures contracts. The results of the enhanced roll strategy are evident from the consistently higher returns and lower risk relative to other benchmark commodity indices such as the S&P GSCI Total Return index, the Bloomberg Commodity Index and the Thomson Reuters CRB index.
|Period||Index||Avg. Ann. Return||Std. Dev.||Sharpe Ratio||Sharpe Ratio Rank|
|Since Inception||Optimised Roll Commodity Total Return||6.10%||14.80%||0.04||1|
|S&P GSCI Total Return CME||-3.90%||23.60%||-0.4||5|
|Bloomberg Commodity Index Total Return||-0.60%||17.00%||-0.36||4|
|RJ/CRB Commodity Total Return Index||0.90%||17.60%||-0.26||3|
|Rogers International Commodity Index Total Return||1.70%||18.80%||-0.2||2|
1 Source: WisdomTree Europe, Bloomberg. Data from 31 May 2001 to 31 March 2016.
Since it is not practical to physically invest in a range of commodities, the fund gets its commodities exposure through an unfunded total return swap that tracks the underlying futures contracts representing the 22 components of the Bloomberg Commodity Index. The fund invests in and physically holds US T-bills and any swap exposure is over-collateralised and reset on a monthly basis.
The details of the WisdomTree Enhanced Commodity UCITS ETF are:
|Fund||Ticker||ISIN||Listing Currency||Base Currency|
|WisdomTree Enhanced Commodity UCITS ETF – USD Acc||WCOA||IE00BYMLZY74||USD||USD|
|WisdomTree Enhanced Commodity UCITS ETF – USD Acc||WCOB||IE00BYMLZY74
|WisdomTree Enhanced Commodity UCITS ETF – USD||WCOG||IE00BZ1GHD37||GBx||USD|