Nasdaq interviewed Nizam Hamid, WisdomTree's European ETF Strategist, to learn more about WisdomTree's offerings, strategies, and commodity-driven ETFs.
What is WisdomTree and what type of products do you offer?
Nizam Hamid: WisdomTree is a provider of smart beta and alternatively weighted UCITS ETFs and short and leveraged ETPs, the latter predominantly covering commodities, equities and fixed income. Our UCITS ETFs offer differentiated strategies covering equity income, quality dividends, small cap and export oriented equities with currency hedged share classes.
The Boost ETPs offer clients flexibility to manage their exposure and hedge portfolio positions, recently these products have had close to $2bn of on exchange turnover, with listings on the LSE, Borsa Italiana and Xetra. Overall AUM for WisdomTree in Europe across both ETF and ETP platforms has surpassed $1 billion.
Do you consider yourselves a passive or an active house?
Hamid: In terms of our UCITS ETFs we consider that we are uniquely positioned in offering strategies that aim to replicate factor exposures that investors would typically have accessed through active managers. The key difference is that WisdomTree build these strategies in a systematic way to ensure that we minimise risk inherent with active managers. We build our own indices to represent these strategies and then offer them via ETFs meaning that we effectively bridge both worlds by offering style exposures, historically only available from active managers, in a passive, transparent and liquid ETF structure.
Most asset managers would consider themselves ‘different’, but why do you consider yourselves innovative?
Hamid: WisdomTree’s track record of being different started over 10 years ago when it launched its first ETFs in the US. These were alternatively weighted at a time when the vast majority of ETFs were only market cap weighted. WisdomTree introduced equity funds weighted by Dividend Stream which is still unique.
More importantly this uniqueness has added value as an investment strategy producing better risk adjusted returns compared to mainstream market capitalisation weighted benchmarks. Our track record in this space sets us apart from other ETF issuers. We have continued to innovate being the first ETF issuer in 2010 to launch a US currency hedged ETF.
How does an investor use an inverse & leverage product? Aren’t they quite risky?
Hamid: Inverse and leveraged products can play an important part in an investor’s portfolio by providing both capital efficient short term exposure to assets and using inverse products to hedge portfolio exposures. It is critical that investors understand the mechanics and impact of daily compounding and how this can have a substantial effect on returns.
The products are very useful for those investors that cannot trade futures or options and are also efficient in that an investor cannot lose more than the initial amount invested. Education is a critical part of investor’s making best use of inverse and leveraged products.
How do you view the “comeback” of commodities?
Hamid: Commodities have made a dramatic recovery on the back of a number of factors including the stabilisation of the oil price, a more balanced approach to supply side output and improved demand characteristics from emerging markets. More recently we have also seen a substantial increase in the gold price as investors look to manage heightened political risk as well as dealing with the consequences of negative yielding fixed income assets.
Overall, the move into broad commodities also reflects a desire to have a hedge against nascent inflationary pressures. The breadth of available strategies, including our newly launched UCITS ETF that uses an enhanced roll methodology to track a broad commodity index, means that investors have increasingly efficient and cost effective ways of gaining exposures to this important asset class.