From the August 2006 issue of Research Magazine • Subscribe!

August 1, 2006

Upstart Firm Launches ETFs

WisdomTree Investments entered the cutthroat ETF business with a bang on June 16, when the New York-based firm unveiled a family of 20 new exchange-traded funds, all of which focus on dividend-rich stocks. Six of the funds are focused on U.S. securities; the rest target high-yielding companies throughout the world. All track WisdomTree's proprietary indexes and are listed on the New York Stock Exchange.

The company's new lineup will compete head-to-head with dividend ETFs offered by much larger rivals. Expense ratios range from 28 to 58 basis points.

In their conference call announcing the products, WisdomTree executives characterized existing equity indexes weighted according to a company's market capitalization size as "flawed." Among the reasons given were that traditional market cap-weighted indexes have the tendency to overemphasize overvalued companies and to ignore undervalued stocks.

Instead, WisdomTree's indices weight companies according to the size of their cash dividend distribution, thus giving greater prominence to companies (of any size and market cap) with proportionally larger dividend streams. "We believe we've found a better way to index," says CEO Jonathon Steinberg.

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Ron L. DeLegge is editor of www.etfguide.com.

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