MOdels portfolios offer advisers flexibility in the asset allocation process, and the models themselves can be flexible and dynamic.
Take the case of the Siegel-WisdomTree portfolio of longevity models. This model portfolio is designed to be a fresher approach to the traditional 60/40 “portfolio by structurally allocating more to stocks over fixed income and prioritizing factors such as dividend yield and low P / E ratios. to seek higher revenue generation and the potential to outperform, “according to WisdomTree. âThe models are strategic in nature, but also reflect tactical leanings based on market conditions. The strategy can include both WisdomTree and non-WisdomTree ETFs.
Proving that it is dynamic, the longevity model portfolio recently added the WisdomTree Managed Futures Strategy (WTMF) to its roster, bringing alternative investments into the fold, completing a position in the WisdomTree Enhanced Commodity Strategy Fund (GCC) in the process. As inflation rises, adding WTMF to the model portfolio might make sense.
âFor example, historically, when commodities have trended higher, managed futures have tended to be long on commodities. Likewise, when commodities have suffered a sustained decline, managed futures have historically tended to start taking short positions in commodities. This complements GCC well in cases where commodities may be down. More broadly, the dynamic long / short nature of WTMF allows it to seek to take advantage of inflationary and deflationary regimes, ânotes Matthew Aydemir, analyst at WisdomTree.
Earlier this year, WisdomTree made a difference with WTMF, adding a model of tactical fairness to the folds of WTMF. This movement helps the fund outperform gold while dampening volatility.
âAlthough the restructuring of WTMF has only been brief, we can see various instances where GCC and Gold have pulled out while WTMF has remained relatively stable. We observe that WTMF recorded the lowest maximum drawdown after the restructuring, which corresponds to our view that one of the main objectives of the alternatives should be to improve the risk-adjusted return of a portfolio â, adds Aydemir.
The impact of WTMF on the Longevity Model Portfolio remains to be seen, but it could prove to be a nifty addition that works well in today’s market environment and beyond.
âThis year, we have found that WTMF has significantly lower volatility and downside risk than gold, while providing superior returns. WTMF’s ability to take long or short positions in various asset classes can also help provide protection if a particular asset class goes into recession. Overall, we believe the Siegel-WisdomTree portfolio of longevity models is in an excellent position to take advantage of the current market environment, âconcludes Aydemir.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.