This Duo Livens Up the Long/Short ETF Proposition

Long/short investing was long the territory of hedge funds and institutional investors. But the ETF industry democratized that access, bringing long/short strategies to the masses.One of the pioneers in terms of bringing alternative strategies to the ETF wrapper, WisdomTree is a rising player in the long/short ETF space. The firm introduced the the WisdomTree Efficient Long/Short U.S. Equity Fund (WTLS) earlier this year. But the issuer isn’t resting on those laurels. WTLS now has a pair of stablemates. That’s thanks to the Oct. 8 debuts of the WisdomTree Efficient Long/Short U.S. SmallCap Equity Fund (WSLS) and the WisdomTree Global Alpha Fund (WTAL). WisdomTree developed these fresh strategies in conjunction with AlphaBeta. AlphaBeta is an Israeli fintech company in which the ETF giant holds a minority stake. As WisdomTree Equity Strategist Brian Manby noted, WSLS and WTAL build on the “portable alpha approach introduced with WTLS.” That indicates age isn’t important with these rookie funds, but DNA is meaningful.Good Time to Consider Long/Short StrategiesAmid turbulence in the bond market, lethargic U.S. economic data, and a looming midterm election, more advisors and sophisticated investors may be compelled to examine long/short strategies. That indicates WSLS and WTAL may prove to be examples of well-timed new ETFs. Specific to WSLS, that “infant” ETF may be impactful out of the gate. That’s because small-caps were hot for much of this year before recently being dinged by rising Treasury yields. “For WSLS, U.S. small cap equity futures provide the baseline market exposure. Alongside that exposure, a dynamic U.S. small cap long/short overlay seeks to favor stocks the models identify as attractive with strong fundamentals, while taking short positions in stocks with deteriorating fundamentals,” said Manby. “The overlay is designed to uncover market neutral alpha through relative stock selection, rather than rely solely on the direction of the small cap market alone.”Global CounterpartFor its part, WTAL could be viewed as the global counterpart to WTLS. The latter fund is the original ETF in the WisdomTree long/short suite. However, WTAL is a departure from WSLS and WTLS. That’s because it combines exposure to both domestic and international developed market equities. WSLS and WTAL add chapters to a story originally penned by WTLS. The new funds embrace data-driven long/short approaches. They simultaneously expand access to a methodology that was previously hard to reach for ordinary investors. “ WSLS and WTAL carry it forward through two distinct applications of the same central idea: use research, data and systematic models to seek returns from stock selection, then make those strategies available in an ETF,” concluded Manby. “Whether paired with U.S. small cap exposure or applied across U.S. and developed international markets, the goal is to widen access to investment approaches traditionally associated with hedge funds.” For more news, information, and analysis, visit the Modern Alpha Content Hub. Disclosures This article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional. WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.