WisdomTree Files for “CEF Fixed Income Fund” ETF
This Prospectus provides the information you need to make an informed decision about investing in the Fund. It contains important facts about the Trust as a whole and the Fund in particular. The Fund is an exchange-traded fund (“ETF”). ETFs are funds whose shares are listed on a stock exchange and traded like equity securities at market prices. ETFs, such as the Fund, allow you to buy or sell shares that represent the collective performance of a selected group of securities. ETFs are designed to add the flexibility, ease and liquidity of stock-trading to the benefits of traditional index-fund investing.
WisdomTree Asset Management, Inc. (“WisdomTree Asset Management”) is the investment adviser to the Fund. WisdomTree Investments, Inc. (“WisdomTree Investments”) is the parent company of WisdomTree Asset Management.*
The WisdomTree CEF Fixed Income Fund seeks to track the price and yield performance, before fees and expenses, of the S-Network Fixed Income Closed-End Funds Index (the “Index”). The Index consists of seventy-five listed closed-end funds that invest in U.S. and/or non-U.S. taxable fixed income securities and meet other specified Index requirements. A closed-end fund, or “CEF,” is a pooled investment vehicle that is registered as an investment company with the Securities and Exchange Commission. CEF shares are listed and traded on national securities exchanges at market prices. Since the Fund’s investment objective has been adopted as a non-fundamental investment policy, the Fund’s investment objective may be changed without a vote of shareholders.
Principal Investment Strategies
The Fund attempts to track the Index by using a “representative sampling” strategy to invest in shares of the CEFs included in the Index. This means that the Fund invests in a sample of those CEFs whose risk, return and other characteristics closely resemble the risk, return and other characteristics of the Index as a whole. The Fund attempts to invest all, or substantially all, of its assets in the CEFs included in the Index. The Fund seeks to provide investors with the potential for fixed income yields through investment in a portfolio of CEFs that, in turn, invest in fixed income instruments. The Fund also seeks potential capital appreciation through investment in CEFs that have historically traded at a “discount” (i.e., below their net asset value). The CEFs held by the Fund pursue an array of investment strategies across the fixed income spectrum. Through investment in these CEFs, the Fund expects to have exposure to a wide range of fixed income instruments, such as corporate bonds, government bonds, loan participations and mortgage-backed securities, as well as securities, such as preferred stock, that share many of the characteristics of traditional fixed income instruments. The Fund is designed to have exposure to U.S. and non-U.S. markets, including emerging markets, and to investments of varying credit quality, including both high yield and investment grade securities. For these reasons, the Fund may be appropriate for investors seeking the potential for taxable yield, as well as capital appreciation, through investment in a diversified portfolio of fixed income CEFs.
Under normal circumstances, at least 95% of the Fund’s total assets (exclusive of collateral held in connection with securities lending) will be invested in the CEFs included in the Index. The Fund generally may invest up to 5% of its total assets in securities not included in the Index, but which the Fund believes will help it track its Index. For example, the Fund may invest in securities that are not components of its Index in order to reflect various corporate actions and other changes to its Index (such as reconstitutions, additions and deletions). Under normal circumstances, as long as the Fund invests at least 95% of its total assets in the CEFs included in the Index, it also may invest its other assets in cash and cash equivalents, as well as in shares of other investment companies, futures contracts, options on futures contracts, options, and swaps. As noted above, the Index consists of seventy-five listed closed-end funds that invest in U.S. and/or non-U.S. taxable fixed income securities and meet other designated Index requirements. In general, the Index consists of seventy-five CEFs that (i) have a stated investment objective of investing in U.S. or non-U.S. fixed income securities, or a combination of such securities, (ii) have a market capitalization of at least $100 million, and (iii) have an average daily dollar trading volume of at least $500,000 for a specified period. The Index ranks those CEFs that are eligible to be included in the Index based on market capitalization, daily trading volume and their respective percentage discount to net asset value. The CEFs with the seventy-five highest average rankings are included in the Index. The Index rules provide that no single CEF can make up more than 8% of the capitalization weight of Index. In addition, the total weight in the Index of all CEFs with weights more than 5% is capped at 40% of the Index. The Index also is screened for diversification across various segments of the economy, based on the stated style of the CEFs included in the Index. The exposure of the Index to various market segments, based on the stated investment objective of each CEF, generally will not exceed the following capitalization weights: Multi-Sector, 30%; Emerging Markets Income, 25%; Global Income, 25%; Preferred, 20%; Loan Participation, 20%; Government, 15%; High Yield, 15%; Mortgage-Backed, 10%; Hybrid, 10%; Investment Grade, 10%.
Additional information about the Index and the methodology used to construct and calculate the Index contained in the Fund’s Statement of Information and available at www.wisdomtree.com.
Closed-End Fund Risk
The Fund pursues its investment objective by investing its assets primarily in closed-end funds or “CEFs” that invest in fixed income securities. A CEF is a pooled investment vehicle that is registered under the Investment Company Act of 1940 and whose shares are listed and traded on U.S. national securities exchanges. The Fund’s investment performance, therefore, depends on the secondary market price and investment performance of the underlying CEFs in which it invests. An investment in the Fund will be subject to the risks associated with investing in these CEFs. Like any stock, a CEF’s share price will fluctuate in response to market conditions and other factors. Secondary market trading prices of CEFs should be expected to fluctuate and such prices may be higher or lower than the net asset value of a CEF’s portfolio holdings. When such prices are higher, shares are said to be trading at a “premium.” When they are lower, shares are said to be trading at a “discount.” CEF shares frequently trade at persistent and ongoing discounts to the net asset value of the CEF’s portfolio investments. There can be no guarantee that shares of a CEF held by the Fund will not trade at a persistent and ongoing discount. Nor can there be any guarantee that an active market in shares of the CEFs held by the Fund will exist. The Fund may not be able to sell CEF shares at a price equal to the net asset value of the CEF. While the Fund seeks achieve capital appreciation by taking advantage of differences between the net asset value of CEF shares and any secondary market premiums or discounts, the Fund may not be able to do so. In addition, there can be no assurance that any CEF will achieve its stated investment objective. While the Fund attempts to invest in a diversified basket of CEFs, lackluster performance of a single CEF can have a negative impact on the performance of the Fund as a whole. The Fund may lose money on its investment in any CEF which, in turn, may cause investors to lose money on an investment in the Fund. References to the investments and risks of the Fund should be understood also to be references to the investments and risks of the underlying CEFs in which the Fund invests (unless otherwise indicated).
Full Prospectus can be found: HERE