Products October 8, 2007

WisdomTree Launches ETF-Based 401(k) Platform

October 8, 2007 (PLANSPONSOR.com) - WisdomTree Investments, Inc., has launched a 401(k) plan solution that uses exchange-traded funds (ETFs) as the core investments.
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To offer this new platform, WisdomTree Investments in April created a new subsidiary, WisdomTree Retirement Services Inc., which is led by Director Al Shemtob (See  Wisdom Tree Forms 401(k) ETF Unit ).

At a press briefing, CEO Jonathan Steinberg commented “With emphasis being placed on fees and transparency, we believe the timing is perfect.” Further, he said that WisdomTree is ideally suited for retirement plans because one of the hallmarks of the company’s fundamentally weighted ETF strategies is the focus on capital preservation and reduced volatility.

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The platform will allow access to index-based investing and WisdomTree’s fundamental ETFs as the heart of the investment strategy, with the option to include mutual funds for additional diversification, the company said. The 401(k) platform also eliminates the trading fees and commissions typically associated with retail ETF purchases, Steinberg said.

The open architecture platform also features third-party Employee Retirement Income Security Act (ERISA) fiduciary and investment advisory services and is designed to be used by plan sponsors, advisers, and third-party administrators (TPAs). The all-inclusive 401(k) ETF program can be accessed for as low as 70 basis points, Shemtob said, at the press briefing.

WisdomTree offers two plan options:

  • The “Model Plan” is a wrap-fee ETF 401(k) turnkey solution that offers six professionally built ETF portfolios attuned to investors’ risk tolerance or target-retirement date. The models feature 11 ETFs from WisdomTree as well as two Vanguard ETFs and two Barclays iShares. Additionally, advisers can supplement the ETF models with a menu of no-load, non-12b-1 mutual funds.
  • The “Custom Plan” features all of the investment options available in the Model Plan and allows advisers who can assume more fiduciary responsibility for their clients to create customized portfolios.

CLS Investment Firm LLC (CLS) will offer the asset allocation services for the platform, Professional Capital Service (PCS) will handle participant recordkeeping, and ICTC (Ameritrade) will perform the custody and trading services.

Administration October 6, 2007

Mercer Warns Pensions about Commodities

June 22, 2006 (PLANSPONSOR.com) - Pension funds that currently invest in commodities, or are looking to do so, should be aware that they could lose money by following the traditional passive futures approach to investment, according to a UK report from Mercer Investment Consulting.
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In a press release, MercerIC explains that, while commodity prices rose significantly in the year ending March 31, 2006, the return on commodity futures was flat.   This was because the market has been (and is now) in ‘contango,’ where commodity futures prices are higher than current ‘spot prices.’ According to the release the typical situation where futures prices are lower than ‘spot prices’ is more likely to create positive ‘roll’ returns for pension funds with passive investments in commodities.

Andy Green, European Director of Investment Policy at Mercer, said in the press release that the increase in the number of investors purchasing commodity futures pushes prices up and could be one of the reasons why markets have fallen into contango.

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If cash flows into commodity markets remain high, there is a risk that commodities futures will stay in contango, Mercer said. In April and May, the contango was a drag on the return of the GSCI, the main commodities index, at an annualized rate of over 10%.

According to Green, “On balance, demand for commodities is likely to remain strong, at least in the short term.   But, it is questionable how long prices of both oil and metals, which make up over half of the main commodities index, can persist before supply increases. The scope for disappointment is high for investors that passively track a commodity futures index. Given current market conditions, passive investment in commodity futures may not be as beneficial as investing directly in energy and mining shares or in actively managed strategies.”

The paper ‘Buying commodities?   You’ve been contangoed!’ is available at  www.merceric.com .

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