WisdomTree Investment Funds

WisdomTree Trust has a family of 20 Exchange Traded Funds (ETFs) whose investment philosophy is based on a unique kind of indexing. Most traditional indexes are weighted based on market cap. The WisdomTree Trust represents the first global family of fundamentally weighted ETFs based on proprietary dividend-weighted indices, which means that the proportion – or "weighting" – of the securities in each index is based on either the amount of cash dividends that companies in each Index pay or the dividend yield of the companies in each index. This means that companies that pay higher amounts of cash dividends or that have higher dividend yields generally will be more heavily weighted in each index and fund.

Most traditional indexes and index funds weight their securities by looking simply at the market capitalization of such securities. WisdomTree included only regular dividends in the determination of total cash dividends and dividend yields (special dividend are excluded from calculation weights).

The ETFs have very low expense ratio ranging between 0.28-0.58%. The complete list is here:
Domestic Funds: WisdomTree Dividend Top 100 Fund (DTN), High-Yielding Equity Fund (DHS), LargeCap Dividend Fund (DLN), MidCap Dividend Fund (DON), SmallCap Dividend Fund (DES), Total Dividend Fund (DTD)
International Funds: DIEFA Fund (DWM), DIEFA High-Yielding Equity Fund (DTH), Europe High-Yielding Equity Fund (DEW), Europe SmallCap Dividend Fund (DFE), Europe Total Dividend Fund (DEB), International Dividend Top 100 Fund (DOO), International LargeCap Dividend Fund (DOL), International MidCap Dividend Fund (DIM), International SmallCap Dividend Fund (DLS), Japan High-Yielding Equity Fund (DNL), Japan SmallCap Dividend Fund (DFJ), Japan Total Dividend Fund (DXJ), Pacific ex-Japan High-Yielding Equity Fund (DNH), Pacific ex-Japan Total Dividend Fund (DND).

DRW : WisdomTree's new ETF on Foreign Real Estate

In mid-December, the State Street Global Advisors (State Street), the investment management arm of State Street Corporation launched the SPDR Dow Jones Wilshire International Real Estate Fund (RWX) on the American Stock Exchange. The ETF was billed to be the first such offering designed to track overseas listed real-estate stocks and is the first ETF to monitor performance of publicly traded global real estate securities outside of the U.S.

Since its launching at the end of last year, the fund has attracted more than $750 million in assets. The SPDR fund follows a benchmark that weights about 150 companies by market capitalization.

Today, a new Global REIT ETF called the WisdomTree International Real Estate Fund (DRW) started trading, which, however, emphasizes the biggest dividend payers in developed foreign markets. The expectation is that companies that emphasize paying out strong dividends are by their very nature going to be managed more conservatively

The fund tracks an index made up of some 224 real-estate development and operating companies in 19 developed markets throughout Europe, Asia and the Far East. The benchmark excludes real-estate investment trusts and operators trading on illiquid exchanges and incorporated outside developed countries. WisdomTree also requires companies to have market caps equaling at least $100 million. They must trade at least $100,000 on average per day during a 6-month period.

The largest country weighting in the index goes to Australia, at about 30% of total assets. No. 2 is Hong Kong, at 22%, with Japan at around 11%. Other countries are represented in single-digit percentages. WisdomTree has estimated that its new fund's trailing price-to-earnings ratio is less than 11. The new fund, DRW, charges an annual expense ratio of 0.58%, slightly less 0.60% charged by the StreetTracks fund, RWX.

We expect both these funds to benefit squarely from the developing markets of REIT in other developing countries and may beat US-based REIT ETFs like the iShares Dow Jones U.S. Real Estate Fund (IYR) or the iShares Cohen & Steers Realty Majors Fund (ICF). These are useful tools for diversifying anyone's portfolio to various other countries.

Four New ETFs from iShares for Global REIT

Effective Friday, November 16, Barclays Global Investors listed four new exchange traded funds (ETFs) in NASDAQ market, that track real estate investment trusts or REITs:

iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund (IFGL)
iShares FTSE EPRA/NAREIT Asia Index Fund (IFAS)
iShares FTSE EPRA/NAREIT Europe Index Fund (IFEU)
iShares FTSE EPRA/NAREIT North America Index Fund (IFNA).

Interestingly, all four ETFs allocate heavily to Australia, with Westfield Group being the largest single stock in all of them. Westfield is an Australia-based mall operator but approximately half of the malls operated by the company are in US and is thus exposed to the behavior of US economy and consumer sentiment. All four funds also have significant investments in Hong Kong and Japan markets.

It should be noted that Barclays already had an ETF similar to IFGL with a very similar name: iShares S&P World ex-US Property Index Fund (WPS). Along with a competitor in its own house, IFGL also needs to compete with 3 outsiders -- all of which are considered popular investment vehicles for diversified investment in the global real estate market:

SPDR Dow Jones Wilshire International Real Estate ETF (RWX),
WisdomTree International Real Estate ETF (DRW).

For purchasing ETFs, expense ratio is an important consideration to keep in mind. The ETFs from iShares, IFGL and WPS, have lower expense ratio (at 0.48%) than RWX (0.60%) or DRW (0.58%).

RevenueShares' ETFs with Revenue-Weighted Stocks

In late February, Paoli, PA-based RevenueShares Investor Services LLC launched its first ETFs on NYSE Arca: RevenueShares Large Cap Fund (RWL), RevenueShares Mid Cap Fund (RWK) and RevenueShares Small Cap Fund (RWJ).

RevenueShares ETFs are ranking companies by revenue as opposed to capital-weighted indexes, which, by definition, buy stocks that are rising and sell stocks that are falling, and thus go against the conventional wisdom of "buy low, sell high" motto. As we reported earlier, such alternative strategies have also been initiated, for example, by WisdomTree Investments which has already carved out a niche for itself with a family of ETFs that weight stocks by earnings and dividends.

RevenueShares weight several existing Standard & Poor's benchmarks by sales. For instance, the RevenueShares Large Cap Fund has different sector weightings than the S&P 500. It is overweight in consumer discretionary and staples, financials and energy, and is light on technology and health-care stocks. Even though earnings in banking and financial stocks have been wiped out the past year on subprime and credit-crunch problems, their revenue have increased, which explains the fund's inclination towards the sector.