In a previous article, I discussed the leading "ETF behemoths" characterized by the top three ETFs boasting the greatest assets under management (AUM). Based on the ETF Central Screener as of April 7th, 2023, three ETFs lead the way. They are the SPDR S&P 500 ETF (SPY (NYSE:SPY)), the iShares Core S&P 500 ETF (IVV), and the Vanguard S&P 500 ETF (VOO).
However, increased competition is always advantageous as it fosters innovation and drives down fees. Although the ETF landscape is primarily governed by broad-market index ETFs from providers like Vanguard, BlackRock (NYSE:BLK), and State Street (NYSE:STT), diligent investors can discover valuable, specialized ETFs offered by smaller boutique providers with unique value propositions.
As we bid farewell to the first quarter of 2023, I would like to highlight three underappreciated ETFs that are worthy of investor attention throughout the rest of the year. Each of these ETFs currently holds less than $100 million in AUM, categorizing them within the smaller segment of the ETF market with unique features that set them apart from larger competitors.
WisdomTree Efficient Gold Plus Equity Strategy Fund (GDE)
WisdomTree's existing suite of "capital efficient" core equity ETFs like WisdomTree U.S. Efficient Core Fund have become popular with investors due to their clever use of bond futures. In essence, NTSX provides access to a 1.5x leveraged 60/40 portfolio (90/60) at a 0.20% expense ratio.
I'm baffled as to why GDE hasn't caught on to the same degree. While NTSX sports around $750 million in AUM, GDE is still sitting at around $7 million. This innovative ETF employs gold futures to offer investors a leveraged 90/90 stocks/gold portfolio under a single ticker.
90% of the GDE's assets are allocated to large-cap U.S. equities, akin to the S&P 500. The remaining 10% is reserved in cash, serving as collateral for gold futures with 9x notional exposure. This results in a 90/90 distribution with a total leverage of 1.8x.
If you combine NTSX with GDE, say in a 70/30 allocation, you could create a portfolio with exposure to 90% U.S. stocks, 42% intermediate Treasurys, and 27% gold for a 0.20% expense ratio without the use of margin, options, or leveraged ETFs.
Harbor Commodity All-Weather Strategy ETF (HGER)
Commodity ETFs can be hit-or-miss. Many of them sport high expense ratios, suffer from the deleterious effects of contango, or spit out a pesky schedule K-1 form that for many investors is a headache to file come tax time. A novel fund that aims to solve those constraints is HGER.
HGER tracks the proprietary Quantix Commodity Index (QCITR), which targets liquid commodities with high expected inflation sensitivity while mitigating negative futures roll yield. Since its inception in February of 2022, the ETF has outperformed the popular Invesco DB Commodity Tracking (DBC).
There's also the matter of fees. At a 0.68% expense ratio, HGER is attractively priced compared to the more popular DBC, which charges 0.87%. As noted earlier, this ETF also does not spit out a Schedule K-1 as it is offered as a 1940-Act ETF structure.
LifeGoal Wealth Builder ETF (WLTH)
Many financial advisors who charge a fixed percentage of AUM will often put their clients into highly complex, all-weather portfolios which incorporate a blend of stocks, bonds, commodities, and sector tilts. While effective, the after-fee results tend to be rather dismal.
WLTH solves all of this by offering the same portfolio strategy, but in a low-cost ETF structure. Launched by ETF entrepreneurs and brothers Taylor & Brett Sohns, WLTH incorporates U.S. and international stocks directly in addition to ETFs focusing on dividend growth, quality, and minimum volatility factors.
In terms of sector tilts, WLTH allocates to U.S. real estate, international real estate, and utilities. On the bond side, WLTH expands beyond the usual aggregate bonds to also include emerging market bonds, TIPS, mortgage-backed securities, high-yield bonds, and long-term corporate bonds.
Finally, to hedge against inflation, the ETF also holds a small allocation to diversified commodities and gold ETFs. The ETF has a general asset allocation target consisting of 65/35 stocks/bonds and charges a 0.34% net expense ratio, far below the 1-2% of AUM charged by most advisors.
This content was originally published by our partners at ETF Central.