Liquid Alternatives: WisdomTree Launches Income Fund Focused On Alternative Credit

May 7, 2021 | Liquid Alternatives, News
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The new ETF will invest in “Publicly Traded Alternative Credit Vehicles” (PACs) from six alternative credit sectors.

Asset manager WisdomTree Investments, Inc. (NASDAQ: WETF) has launched a new ETF designed to navigate the current yield-challenged environment. The WisdomTree Alternative Income Fund (HYIN) will invest in alternate credit sectors and trade on the CBOE. (Intrado GlobeNewswire)

WisdomTree Alternative Income Fund (HYIN)

The ETF will track the price and yield performance, before fees and expenses, of the Gapstow Liquid Alternative Credit Index (GLACI).

The GLACI is an equal-weighted index that tracks the performance of debt and debt-based securities of approximately 35 “Publicly Traded Alternative Credit Vehicles” (PACs).

The PACs comprise Business Development Companies (BDCs), Real Estate Investment Trusts (REITs), and Closed-End Funds (CEFs). These would be drawn from the alternative credit sectors of traded credit, structured credit, and private credit.

“Against the backdrop of low yields in treasuries, corporate bonds, and equities, HYIN offers considerable potential yield advantages and provides a moderate to low correlation to equity and fixed income markets,” WisdomTree said in a statement.

Kevin Flanagan, WisdomTree’s Head of Fixed Income Strategy, disclosed to ETF.com that the fund’s correlation with the S&P 500 Index is just 0.65, and its correlation with the Bloomberg Barclays Aggregate Bond Index is slightly negative, -0.06.

According to ETF.com, which cited a WisdomTree white paper, the current yield on GLACI, the underlying index, stands at 8.72% versus 1.45% for the S&P 500 or 1.59% for the Bloomberg Barclays Agg.

Chris Acito, Gapstow’s CEO, said the index was diversified, liquid, and investable.

The ETF has an expense ratio of 3.20% including a management fee of 0.50% and acquired fund fees and expenses of 2.70%.

Investing challenges

“Fixed-income investors are facing some specific market challenges, including historically low rates, both in the U.S. and on a global scale,” commented Flanagan.

“One way for investors to search for income in a yield-challenged environment is through alternative credit, which consists of debt and debt-based securities that have a higher risk-return profile than traditional high yield bonds. With HYIN, we’re offering investors a vetted and thoughtful option to access exactly that.”

Related Story:   Optimizing the 60/40 Portfolio Through Varying Market Conditions with Liquid Alts

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