A smart beta exchange traded fund, the WisdomTree Barclays Yield Enhanced U.S. Aggregate Bond Fund (AGGY) debuted on 07/09/2015, and offers broad exposure to the Total Bond Market ETFs category of the U.S. equity market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
AGGY is managed by Wisdomtree, and this fund has amassed over $383.55 M, which makes it one of the average sized ETFs in the Total Bond Market ETFs. This particular fund seeks to match the performance of the Bloomberg Barclays U.S. Aggregate Enhanced Yield Index before fees and expenses.
The Bloomberg Barclays U.S. Aggregate Enhanced Yield Index broadly capture the U.S. investment grade, fixed income securities market while seeking to enhance yield within desired risk parameters and constraints.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.12% for AGGY, making it one of the cheaper products in the space.
It's 12-month trailing dividend yield comes in at 2.97%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Us Treasury Notes 2.25% accounts for about 0.40% of total assets, followed by Us Treasury Note 3.375% 11/15/2019 and Us Treasury Note 2.25% 11/15/2027.
AGGY's top 10 holdings account for about 3.64% of its total assets under management.
Performance and Risk
The fund's year-to-date return has lost about -3.08%, and is down about -1.47% in the last one year (as of 06/05/2018). AGGY has traded between $48.20 and $51.19 in the past 52-week period.
The fund has a beta of 0.04 and standard deviation of 3.56% for the trailing three-year period, which makes AGGY a medium choice in this particular space. With about 1996 holdings, it effectively diversifies company-specific risk.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center .
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