(NEW) WisdomTree 90/60 U.S. Balanced Fund

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columbia
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by columbia » Thu Dec 06, 2018 9:11 am

So it’s benchmark appears to be:

50% equity
30% intermediate bond
20% long/short equity

typical.investor
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by typical.investor » Thu Dec 06, 2018 9:23 am

columbia wrote:
Thu Dec 06, 2018 9:11 am
So it’s benchmark appears to be:

50% equity
30% intermediate bond
20% long/short equity
Why do you believe that?

I don't think long/short equity applies to the 90/60 fund.

The Principal Risks listed in the prospectus doesn't list Short Sales Risk.

So I don't believe that's the appropriate benchmark.
Last edited by typical.investor on Thu Dec 06, 2018 9:27 am, edited 1 time in total.

columbia
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by columbia » Thu Dec 06, 2018 10:10 am

typical.investor wrote:
Thu Dec 06, 2018 9:23 am
columbia wrote:
Thu Dec 06, 2018 9:11 am
So it’s benchmark appears to be:

50% equity
30% intermediate bond
20% long/short equity
Why do you believe that?

I don't think long/short equity applies to the 90/60 fund.

The Principal Risks listed in the prospectus doesn't list Short Sales Risk.

So I don't believe that's the appropriate benchmark.
Basing that on this:
https://www.wisdomtree.com/blog/2018-08 ... -fund-ntsx

international001
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by international001 » Thu Dec 06, 2018 10:23 am

vineviz wrote:
Wed Aug 08, 2018 9:10 pm
columbia wrote:
Wed Aug 08, 2018 7:52 pm
Historically since 1930, a portfolio like this would have theoretically had returns about 24% higher than a 100/0 portfolio with 8% less annual volatility. So I think it is interesting in principle.
Out of curiosity: link?
Here's a link to a backtest in PortfolioVisualizer (with the caveat the quick 1.5x simulation I made may or may not match what this new ETF actually produces.

NOTE: I did NOT simulate expenses, though at 20bps I don't think that matters an awful lot.

https://www.portfoliovisualizer.com/bac ... ion1_1=100

Link is telling me that '9060SIM'

How do you backtest with leverage in PV?

typical.investor
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by typical.investor » Thu Dec 06, 2018 10:31 am

columbia wrote:
Thu Dec 06, 2018 10:10 am
typical.investor wrote:
Thu Dec 06, 2018 9:23 am
columbia wrote:
Thu Dec 06, 2018 9:11 am
So it’s benchmark appears to be:

50% equity
30% intermediate bond
20% long/short equity
Why do you believe that?

I don't think long/short equity applies to the 90/60 fund.

The Principal Risks listed in the prospectus doesn't list Short Sales Risk.

So I don't believe that's the appropriate benchmark.
Basing that on this:
https://www.wisdomtree.com/blog/2018-08 ... -fund-ntsx
Read it again. It's clearly not the benchmark.

What it is is a hypothetical portfolio with desirable characteristics offered by alternatives.

So by using the leveraged 90/60 fund, you can have full access to core holdings (stocks and bonds) but by using less capital. Thus you will have money left over to hold alternatives which sometimes be a drag on returns (commodities for instance) without having to worry about the drag because you are fully invested.

2pedals
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by 2pedals » Thu Dec 06, 2018 11:28 am

Interesting fund, but I will not be investing in this fund. It would violate my self imposed rule that risks are to be taken on the equity side of the asset allocation and 90% equity is too much for me (I would be unable to sleep well at night). Entering the futures markets on the bond side will increase risks.

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vineviz
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by vineviz » Thu Dec 06, 2018 12:06 pm

international001 wrote:
Thu Dec 06, 2018 10:23 am
vineviz wrote:
Wed Aug 08, 2018 9:10 pm
columbia wrote:
Wed Aug 08, 2018 7:52 pm
Historically since 1930, a portfolio like this would have theoretically had returns about 24% higher than a 100/0 portfolio with 8% less annual volatility. So I think it is interesting in principle.
Out of curiosity: link?
Here's a link to a backtest in PortfolioVisualizer (with the caveat the quick 1.5x simulation I made may or may not match what this new ETF actually produces.

NOTE: I did NOT simulate expenses, though at 20bps I don't think that matters an awful lot.

https://www.portfoliovisualizer.com/bac ... ion1_1=100

Link is telling me that '9060SIM'

How do you backtest with leverage in PV?
I must have made a custom series, but I've since deleted it.

You can get an approximation by building a portfolio that is 90% stocks, 60% bonds and -50% cash.

https://www.portfoliovisualizer.com/bac ... ion3_1=-50
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

jalbert
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by jalbert » Thu Dec 06, 2018 12:25 pm

nisiprius wrote:
Wed Aug 08, 2018 7:06 pm
This is weird. I thought maybe the prospectus would help me. On this page, it says
click here to view or download prospectus[/url]
When I clicked on that link, this is what I saw. How about you?

Image

Reproduced with both Safari 11.1.2 (13605.3.8) and Firefox 61.0.1 (64-bit), Mac OS X 10.13.6.
It’s a bug in the URL string the code invoked by that link is trying to execute.
Risk is not a guarantor of return.

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vineviz
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by vineviz » Thu Dec 06, 2018 12:56 pm

2pedals wrote:
Thu Dec 06, 2018 11:28 am
Interesting fund, but I will not be investing in this fund. It would violate my self imposed rule that risks are to be taken on the equity side of the asset allocation and 90% equity is too much for me (I would be unable to sleep well at night). Entering the futures markets on the bond side will increase risks.
The fund is not really intended to be the only holding in a portfolio, so when used as designed you wouldn't necessarily have 90% equity exposure.

For instance, since 2004 simple 60/40 portfolio (e.g. VBINX, Vanguard Balanced Index) had 60% equity exposure with annual returns of 6.89% and a maximum drawdown of 32.57%.

Diversifying with 5% in gold (e.g. GLD, SPDR Gold Shares ETF) and 15% in international bonds (e.g. PFORX, PIMCO International Bond (USD-Hdg) ) would have reduced the drawdown to 27.45% and kept annual returns fairly steady at 6.88%. This portfolio had an equity exposure of 48%.

Keeping the 5% gold and 15% international bonds but using NTSX instead of VBINX creates a much more efficient portfolio. You'd only need 66.7% in NTSX to get back to the 60% net equity exposure you started with, freeing up 18.3% of the portfolio to go back into bonds (e.g. VFITX, Vanguard Interm-Term Treasury). This portfolio had annual returns of 8.31%, with is about 20% higher than with the original portfolio, with less downside risk: maximum drawdown was just 25.77%.

https://www.portfoliovisualizer.com/bac ... 9_2=-33.33

To recap, that's higher returns and lower risk with the same equity exposure.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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whodidntante
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by whodidntante » Thu Dec 06, 2018 1:50 pm

I evaluated investing in Treasury futures directly, since I don't really need a fund to do that for me. My conclusion is that buying Treasury futures provide most of the interest rate risk with only a small yield, with the yield curve as flat as it is right now.

I don't think this fund should be owned by anyone.

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vineviz
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by vineviz » Thu Dec 06, 2018 3:08 pm

whodidntante wrote:
Thu Dec 06, 2018 1:50 pm
I evaluated investing in Treasury futures directly, since I don't really need a fund to do that for me. My conclusion is that buying Treasury futures provide most of the interest rate risk with only a small yield, with the yield curve as flat as it is right now.

I don't think this fund should be owned by anyone.
It's possible that there are at least some investors who have preferences and/or circumstances that differ from yours.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

ThrustVectoring
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by ThrustVectoring » Thu Dec 06, 2018 3:24 pm

whodidntante wrote:
Thu Dec 06, 2018 1:50 pm
I evaluated investing in Treasury futures directly, since I don't really need a fund to do that for me. My conclusion is that buying Treasury futures provide most of the interest rate risk with only a small yield, with the yield curve as flat as it is right now.

I don't think this fund should be owned by anyone.
I've also been evaluating direct investment in Treasury futures, and think that's at least a significantly better option than this fund. My conclusions are somewhat different, though - the carry on the short end of the curve is significant at the risk level it represents, and a flat yield curve makes a long/short "steepener" trade pretty attractive. Like, the 2-year treasury futures contract right now is yielding 30 basis points above the implied repo rate - that seems to me like a reasonable price to be paid to take on that amount of interest rate risk.
Current portfolio: 60% VTI / 40% VXUS

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Taylor Larimore
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by Taylor Larimore » Thu Dec 06, 2018 7:12 pm

This fund is not complicated and is potentially very useful to investors who want a portfolio a little more sophisticated than a straight market-cap weighted approach.
Bogleheads:
“Simplicity is the ultimate sophistication.” -- Leonardo da Vinci
In my opinion, and more importantly, in the opinion of Mr. Bogle and many others, "Simplicity is the Master Key to investment success."

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

rhe
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by rhe » Thu Dec 06, 2018 7:39 pm

ThrustVectoring wrote:
Thu Dec 06, 2018 3:24 pm
whodidntante wrote:
Thu Dec 06, 2018 1:50 pm
I evaluated investing in Treasury futures directly, since I don't really need a fund to do that for me. My conclusion is that buying Treasury futures provide most of the interest rate risk with only a small yield, with the yield curve as flat as it is right now.

I don't think this fund should be owned by anyone.
I've also been evaluating direct investment in Treasury futures, and think that's at least a significantly better option than this fund. My conclusions are somewhat different, though - the carry on the short end of the curve is significant at the risk level it represents, and a flat yield curve makes a long/short "steepener" trade pretty attractive. Like, the 2-year treasury futures contract right now is yielding 30 basis points above the implied repo rate - that seems to me like a reasonable price to be paid to take on that amount of interest rate risk.
I reached a similar conclusion. I have a large position in 2 year treasuries, plus a steepener trade. I agree that the longer maturity treasuries look like a bad deal because the yield curve is so flat.

The position has been a good one to have this year.

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vineviz
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by vineviz » Thu Dec 06, 2018 7:54 pm

Taylor Larimore wrote:
Thu Dec 06, 2018 7:12 pm
This fund is not complicated and is potentially very useful to investors who want a portfolio a little more sophisticated than a straight market-cap weighted approach.
Bogleheads:
“Simplicity is the ultimate sophistication.” -- Leonardo da Vinci
In my opinion, and more importantly, in the opinion of Mr. Bogle and many others, "Simplicity is the Master Key to investment success."
I agree, but there are many investors with enough financial knowledge to consider a fund like this to the epitome of simplicity.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Theoretical
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by Theoretical » Thu Dec 06, 2018 10:52 pm

vineviz wrote:
Thu Dec 06, 2018 7:54 pm
Taylor Larimore wrote:
Thu Dec 06, 2018 7:12 pm
This fund is not complicated and is potentially very useful to investors who want a portfolio a little more sophisticated than a straight market-cap weighted approach.
Bogleheads:
“Simplicity is the ultimate sophistication.” -- Leonardo da Vinci
In my opinion, and more importantly, in the opinion of Mr. Bogle and many others, "Simplicity is the Master Key to investment success."
I agree, but there are many investors with enough financial knowledge to consider a fund like this to the epitome of simplicity.
Especially because it's not doing anything untoward with the treasury futures, by design. It's functionally doing the same trading practices as most index funds do to provide liquidity for redemptions by holding cash and e-mini S&P futures yet still being fully invested rather than have a cash drag.

international001
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by international001 » Fri Dec 07, 2018 5:19 pm

vineviz wrote:
Thu Dec 06, 2018 12:06 pm

I must have made a custom series, but I've since deleted it.

You can get an approximation by building a portfolio that is 90% stocks, 60% bonds and -50% cash.

https://www.portfoliovisualizer.com/bac ... ion3_1=-50
Oh.. negative CASHX.

Excuse my ignorance. What does this mean exactly? The fund is doing some leveraging, but what does it mean leveraging through CASHX

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vineviz
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by vineviz » Fri Dec 07, 2018 5:25 pm

international001 wrote:
Fri Dec 07, 2018 5:19 pm
vineviz wrote:
Thu Dec 06, 2018 12:06 pm

I must have made a custom series, but I've since deleted it.

You can get an approximation by building a portfolio that is 90% stocks, 60% bonds and -50% cash.

https://www.portfoliovisualizer.com/bac ... ion3_1=-50
Oh.. negative CASHX.

Excuse my ignorance. What does this mean exactly? The fund is doing some leveraging, but what does it mean leveraging through CASHX
Mostly this is just the easiest way in Portfolio Visualizer to simulate a leveraged portfolio.

It's roughly analogous to the way you'd lever in real life (e.g. borrowing at some rate in order to purchase securities on margin, or holding cash as collateral on a futures contract), but I make no promises about whether shorting cash (i.e. borrowing at the 30-day Tbill rate) is a good approximation of the cost of leverage for NTSX. My guess is that it overestimates the costs fo leverage, but I don't know for sure.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

columbia
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by columbia » Fri Dec 07, 2018 7:31 pm

Dropped 3.94% today (vs. 2.29% for TSM).

That’s the kind of thing its owners are expecting?

PlateVoltage
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by PlateVoltage » Sat Dec 08, 2018 9:43 am

columbia wrote:
Fri Dec 07, 2018 7:31 pm
Dropped 3.94% today (vs. 2.29% for TSM).

That’s the kind of thing its owners are expecting?
No, I was expecting it to lose about 0.63%.

https://finance.yahoo.com/quote/NTSX/

hdas
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by hdas » Sat Dec 08, 2018 12:25 pm

PlateVoltage wrote:
Sat Dec 08, 2018 9:43 am
columbia wrote:
Fri Dec 07, 2018 7:31 pm
Dropped 3.94% today (vs. 2.29% for TSM).

That’s the kind of thing its owners are expecting?
No, I was expecting it to lose about 0.63%.

https://finance.yahoo.com/quote/NTSX/
This is indeed interesting and deserves an explanation. That kind of difference it's not normal. I would note that ultra bond futures (25+ years) were down a tad on Friday, but even with that....I don't think their duration target is that long....should be closer to 5yr. Definitely something for our in house detective Nisispirus to look into :wink:
Stay the course and buy some more.

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vineviz
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by vineviz » Sat Dec 08, 2018 3:56 pm

hdas wrote:
Sat Dec 08, 2018 12:25 pm
PlateVoltage wrote:
Sat Dec 08, 2018 9:43 am
columbia wrote:
Fri Dec 07, 2018 7:31 pm
Dropped 3.94% today (vs. 2.29% for TSM).

That’s the kind of thing its owners are expecting?
No, I was expecting it to lose about 0.63%.

https://finance.yahoo.com/quote/NTSX/
This is indeed interesting and deserves an explanation. That kind of difference it's not normal. I would note that ultra bond futures (25+ years) were down a tad on Friday, but even with that....I don't think their duration target is that long....should be closer to 5yr. Definitely something for our in house detective Nisispirus to look into :wink:
I think the point is that NTSX did NOT actually lose 3.94% on Friday. It was only down 0.63%.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

international001
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Re: (NEW) WisdomTree 90/60 U.S. Balanced Fund

Post by international001 » Sat Dec 08, 2018 4:44 pm

vineviz wrote:
Fri Dec 07, 2018 5:25 pm


Mostly this is just the easiest way in Portfolio Visualizer to simulate a leveraged portfolio.

It's roughly analogous to the way you'd lever in real life (e.g. borrowing at some rate in order to purchase securities on margin, or holding cash as collateral on a futures contract), but I make no promises about whether shorting cash (i.e. borrowing at the 30-day Tbill rate) is a good approximation of the cost of leverage for NTSX. My guess is that it overestimates the costs fo leverage, but I don't know for sure.
So at what rate at you borrowing? And how long do you have to pay?

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