WisdomTree Files For WisdomTree Emerging Market Corporate Bond Fund
WisdomTree has filed paperwork with the SEC for a “WisdomTree Emerging Market Corporate Bond Fund.” The WisdomTree Emerging Market Corporate Bond Fund (the “Fund”) seeks a high level of total return consisting of both income and capital appreciation. They did not specify a trading symbol or expense ratio in the initial filing.
The Fund’s Investment Strategy
The Fund attempts to achieve its investment objective through investment in debt securities of corporations that are domiciled in or economically tied to emerging market countries. Under normal circumstances, the Fund will invest at least 80% of its net assets in Corporate and Quasi-Sovereign Debt. For these purposes, Corporate and Quasi-Sovereign Debt includes fixed income securities, such as bonds, notes or other debt obligations denominated in U.S. dollars or in local currencies of emerging market countries, as well as other instruments described herein. Quasi-Sovereign Debt, specifically, refers to fixed income securities or debt obligations that are issued by companies or agencies that may receive financial support or backing from the local government (collectively, “Quasi-Sovereign Institutions”). The Fund is an actively managed exchange-traded fund (“ETF”).
The Fund is designed to provide exposure to Corporate and Quasi-Sovereign Debt of issuers from a broad range of emerging market regions and countries. The Fund currently intends to focus its investment on fixed income securities issued by emerging market corporations and Quasi-Sovereign Institutions, denominated primarily in U.S. dollars. The Fund, however, also may invest in Corporate and Quasi-Sovereign Debt denominated in local emerging market currencies. Additionally, the Fund may invest in US doller- and emerging market currency-denominated fixed income securities issued by supranational organizations, such as the European Investment Bank, International Bank for Reconstruction and Development, International Finance Corporation, or other regional development banks, and inflation-linked debt securities of emerging market issuers. The Fund may invest up to 10% of its total assets in preferred stocks.
The Fund intends to provide exposure across several geographic regions and countries. The Fund intends to invest in Corporate Debt from the following regions: Asia, Latin America, Eastern Europe, Africa and the Middle East. Within these regions, the Fund is likely to invest in countries such as: Brazil, Chile, China, Colombia, Hong Kong, India, Indonesia, Israel, Kazakhstan, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, Singapore, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand Turkey, and the United Arab Emirates (“UAE”). This list may change based on market developments. The Fund’s credit exposures are consistently monitored from a risk perspective and may be modified, reduced or eliminated. The Fund’s exposure to any single issuer generally will be limited to 10% of the Fund’s assets. The percentage of Fund assets invested in a specific region, country or issuer will change from time to time.
The universe of emerging market corporate debt currently includes securities that are rated “investment grade” as well as “non-investment grade.” The Fund intends to provide a broad-based exposure to emerging market corporate debt and therefore will invest in both investment-grade and non-investment-grade securities. Securities rated investment grade generally are considered to be of higher credit quality and subject to lower default risk. Although securities rated below investment grade may offer the potential for higher yields, they generally are subject to a higher potential risk of loss.
The Fund attempts to limit interest rate risk by maintaining an aggregate portfolio duration of between two and 10 years under normal market conditions. Aggregate portfolio duration is important to investors as an indication of the Fund’s sensitivity to changes in interest rates. Funds with higher durations generally are subject to greater interest rate risk. An aggregate portfolio duration of between two and ten years generally would be considered to be “intermediate.” The Fund’s actual portfolio duration may be longer or shorter depending upon market conditions. The Fund may also invest in short- term money market securities denominated in U.S. dollars and the currencies of countries in which the Fund invests.
For purposes of the 80% investment policy described above, Corporate and Quasi-Sovereign Debt includes investments in derivatives such as forward currency contracts, interest rate swaps, inflation-linked swaps, total return swaps, credit linked notes, and combinations of investments that provide similar exposure to local currency debt, such as investments in USD-denominated bonds combined with forward currency positions or swaps. If forward currency and swaps positions are not being implemented in combination with USD-denominated bonds, the Fund’s use of forward contracts and swaps will be underpinned by investments in short-term, high-quality U.S. money market securities and is designed to provide exposure similar to investments in local currency deposits. A forward currency contract is an agreement to buy or sell a specific currency at a future date at a price set at the time of the contract. A swap is an agreement between two parties to exchange payments based on a reference asset, which may be a currency or interest rate but also may be a single asset, a pool of assets or an index of assets. A currency swap is an agreement between two parties to exchange one currency for another at a future rate. An interest rate swap involves the exchange of a floating interest rate payment for a fixed interest payment. An inflation-linked swap is an agreement between two parties to exchange payments at a future date based on the difference between a fixed payment and a payment linked to the inflation rate at a future date. A total return swap is an agreement between two parties in which one party agrees to make payments of the total return of a reference asset in return for payments equal to a rate of interest on another reference asset. A credit linked note is a type of structured note whose value is linked to an underlying reference asset or entity. Credit linked notes typically provide periodic payments of interest as well as payment of principal upon maturity. The Fund may invest up to 20% of its assets in debt instruments denominated in U.S. dollars issued by emerging market governments, regional development banks and supranational issuers, as well as derivatives based on such instruments.
The decision to secure exposure through direct investment in bonds or indirectly through derivative transactions will be a function of, among other things, accessibility, credit exposure, tax ramifications and regulatory requirements applicable to U.S. investment companies. If, subsequent to an investment, the 80% requirement is no longer met, the Fund’s future investments will be made in a manner that will bring the Fund into compliance with this policy. The Trust will provide shareholders with sixty (60) days’ prior notice of any change to this policy for the Fund.
For the complete filing click: HERE