WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

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nisiprius
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by nisiprius »

Leveraged funds are not my thing and I take a jaundiced view of their complex internals, but I do peek from time to time. The job NTSX is intended to do--at least as I understood it from WisdomTree's initial presentation--is to allow you to get the same results as a boring 60/40 portfolio, but using only ⅔ of your portfolio space to do it. That leaves you free to fill up the other ⅓ with an "alpha strategy" or a liquid alt as diversifier or what have you, without worrying that lower return in that allocation will drag down portfolio return because you've already got the full return in the other ⅔.

From that point of view, it's reasonable to compare the results a portfolio of 66.7% NTSX and 33.3% "CASHX" (PortfolioVisualizer's pseudo-ticker for cash, one-month Treasury bills) with a straight 60/40 VTI/BND. If NTSX is doing it's job--what I think is supposed to be its job--they should be about the same. 100% of the behavior of 60/40 using only ⅔ of your portfolio. If I owned it personally, I don't think I'd have any complaints. Tracking it daily doesn't make sense to me.

The results in terms of "doing what it's supposed to," look pretty good. I can't judge the safety or reliability of the financial engineering they use to get those results.

Source

Image

The discrepancies do matter, and the tracking isn't perfect even on a month-to-month level. The fact that NTSX (blue line) is almost always above the straight 60/40 (red line) is to some extent the luck of the starting point. If you invested at the worst possible time, that looks to be 3/31/2020 because NTSX + CASHX cost more to buy than VTI + BND. If you'd invested $10,000 at the start of April, 2020:

Source

Image

then the NTSX + CASHX investor would be $400 behind the straight 60/40 investor, or -4% behind. March 2020 can be regarded as a pretty severe stress test. Theoretically you aren't putting the other 33.3% into cash, but into something clever, and some tracking error might be worth it in order to give you the ability to do that.

Another way to look at it is that over that time period, an investment of $10,000 in 60/40 would have grown $10,000 to $13,257--it would have made $3,257. The hope is that a pure investment in 100% NTSX would have made 1.5X that = $4,885.50. The reality was that it would have made $4,077 = 1.25X as much as the 60/40 portfolio. Not bad for the absolute worst possible time. And anyone buying before that worst possible time would have been happy with the tracking error.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Phyneas »

I appreciate the responses, and I see the logic in them, but I suppose I'm wondering more 'why' this is happening, as it is not only the tracking error, but also the intra-day spread.

For instance, TYA is a 3x leveraged ITT ETF that uses the same, or similar (as far as I can tell from the prospectus), mechanism to achieve its leverage - namely treasury futures that are rolled over quarterly. It has a lower AUM, and lower daily trading volume, yet its average spread as per etf.com is 0.08% vs NTSX's 0.23%. NTSX is made up of the S&P 500 stocks and treasury futures, two very liquid assets, yet the spread is still higher.

As nisiprius had pointed out, it seems to do its job over the long run, which is what matters, but it still seems a bit strange. Maybe it is the exchange it trades on, or some other esoteric aspect of it?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Softballer »

BND may be the wrong ETF for comparison since NTSX uses a ladder of treasury futures. Someone had a backtest that used 1/3 SHY, 1/3 IEF and 1/3 TLT for the bond portion which may be a better approximation. How often it is rebalanced could also be a factor.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by occambogle »

Semi-related, if you want to backtest NTSX for longer than its existence, this is the simulation that I have always used (not my idea, I forget who first posted it)... 90% S&P500, 20% STT, 20% ITT, 20% LTT, -50% Cash:

NTSX Simulation vs Actual

NTSX actually uses 5 different duration bond futures, but the simulation approximates it fairly well. You can see the exact holdings here:

https://www.wisdomtree.com/investments/ ... s-ntsx.pdf

Interesting they are getting 4.84% on their 12% cash collateral as well.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by thenextguy »

occambogle wrote: Sat Apr 15, 2023 10:50 am Interesting they are getting 4.84% on their 12% cash collateral as well.
That's about what t-bills are paying.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by occambogle »

thenextguy wrote: Sat Apr 15, 2023 11:31 am
occambogle wrote: Sat Apr 15, 2023 10:50 am Interesting they are getting 4.84% on their 12% cash collateral as well.
That's about what t-bills are paying.
Sure, I’d just forgotten that they could earn interest on the collateral as well as the futures.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

If you try to hand roll this with VTI and 10% collateral for treasury futures, is it likely the 10% initial collateral would be sufficient to prevent ever having to sell VTI? If so then seems reasonably to try mimicking NTSX
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by bgf »

Appreciate the post by nisiprius. The benefits of NTSX as I see them vs 60-40 are

- improved tax efficiency
- potentially more diversified, extent and effectiveness is based on what you do with the other 1/3 of your money, as nisiprius said, it’s not really designed to just be in cash
- possible rebalancing bonus, though this is probably just path dependent luck

So how good is NTSX? In and of itself it provides an investor an opportunity for improved performance, but it really comes down to how you use it.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

hiddenpower wrote: Sun May 21, 2023 10:21 am If you try to hand roll this with VTI and 10% collateral for treasury futures, is it likely the 10% initial collateral would be sufficient to prevent ever having to sell VTI? If so then seems reasonably to try mimicking NTSX
Probably, but if you really just wanted to exactly replicate NTSX, I’d actually just use NTSX. Letting someone else do all the quarterly futures rolling is worth it to me.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

muffins14 wrote: Sun May 21, 2023 6:18 pm
hiddenpower wrote: Sun May 21, 2023 10:21 am If you try to hand roll this with VTI and 10% collateral for treasury futures, is it likely the 10% initial collateral would be sufficient to prevent ever having to sell VTI? If so then seems reasonably to try mimicking NTSX
Probably, but if you really just wanted to exactly replicate NTSX, I’d actually just use NTSX. Letting someone else do all the quarterly futures rolling is worth it to me.
Id rather not do that because Id like the option to stop if inflation is sky high, rates are zero, and the fed is forecasting their exact next steps. I’ve also compared the dividend yields and it seems about equal when you add back in the ER
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by kevinf »

muffins14 wrote: Sun May 21, 2023 6:18 pm
hiddenpower wrote: Sun May 21, 2023 10:21 am If you try to hand roll this with VTI and 10% collateral for treasury futures, is it likely the 10% initial collateral would be sufficient to prevent ever having to sell VTI? If so then seems reasonably to try mimicking NTSX
Probably, but if you really just wanted to exactly replicate NTSX, I’d actually just use NTSX. Letting someone else do all the quarterly futures rolling is worth it to me.
Yes, there is value here in simplicity. Getting elbow deep into rolling your own futures and deciding when to rebalance and everything else creates a temptation to meddle while you're there. I try to create a portfolio that is as "set it and forget it" as possible. That way there isn't an incredible number of levers for me to tweak when things aren't going perfectly or when everyone is whispering in your ear about a global economic recession due to a US default. The expense ratio on NTSX is extremely reasonable and if your justification for replicating it is to save yourself the 0.2% drag on the portfolio, all you're really doing is trying for the high score at the end of the game.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

kevinf wrote: Sun May 21, 2023 6:34 pm
muffins14 wrote: Sun May 21, 2023 6:18 pm
hiddenpower wrote: Sun May 21, 2023 10:21 am If you try to hand roll this with VTI and 10% collateral for treasury futures, is it likely the 10% initial collateral would be sufficient to prevent ever having to sell VTI? If so then seems reasonably to try mimicking NTSX
Probably, but if you really just wanted to exactly replicate NTSX, I’d actually just use NTSX. Letting someone else do all the quarterly futures rolling is worth it to me.
Yes, there is value here in simplicity. Getting elbow deep into rolling your own futures and deciding when to rebalance and everything else creates a temptation to meddle while you're there. I try to create a portfolio that is as "set it and forget it" as possible. That way there isn't an incredible number of levers for me to tweak when things aren't going perfectly or when everyone is whispering in your ear about a global economic recession due to a US default. The expense ratio on NTSX is extremely reasonable and if your justification for replicating it is to save yourself the 0.2% drag on the portfolio, all you're really doing is trying for the high score at the end of the game.

The ER is definitely fine but I highlighted this fact since many go all in on these funds in their taxable accounts for the tax efficiency. When I add back in the ERs, it doesn’t seem all that more efficient. VT seems like a better building block to me. Id rather that than ever want to sell NTS(*) when it’s apparent bonds are in for a bad ride. I’m sure we will witness this outcome again over the long term.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

How come most of the distributions have been income? I was expecting more LT gains due to using treasury futures.

Source: https://i.imgur.com/jd2nGOK.png
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

hiddenpower wrote: Wed Jun 07, 2023 5:38 pm How come most of the distributions have been income? I was expecting more LT gains due to using treasury futures.

Source: https://i.imgur.com/jd2nGOK.png
What’s the source of data for that?

I imagine your 1099 may differ. If I am very bored this weekend I will track down my 1099 from the last time I held NTSX and let you know what it said
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

muffins14 wrote: Wed Jun 07, 2023 5:55 pm
hiddenpower wrote: Wed Jun 07, 2023 5:38 pm How come most of the distributions have been income? I was expecting more LT gains due to using treasury futures.

Source: https://i.imgur.com/jd2nGOK.png
What’s the source of data for that?

I imagine your 1099 may differ.
Morningstar. Treasury futures should come through as 60/40 treatment afaik. Maybe it's because the fund has internal losses from the bond havoc but jw if anyone knows.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

checking my 1099, all I can say is that I had dividends from NTSX, and 100% were qualified
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

muffins14 wrote: Wed Jun 07, 2023 9:58 pm checking my 1099, all I can say is that I had dividends from NTSX, and 100% were qualified
But they weren't 60/40 treatment on the bond side. That's what I don't get about this fund. They should be able to structure a good chunk at LTCG, but is it just because there aren't any gains? 100% qual dividends is nice though
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

hiddenpower wrote: Wed Jun 07, 2023 10:04 pm
muffins14 wrote: Wed Jun 07, 2023 9:58 pm checking my 1099, all I can say is that I had dividends from NTSX, and 100% were qualified
But they weren't 60/40 treatment on the bond side. That's what I don't get about this fund. They should be able to structure a good chunk at LTCG, but is it just because there aren't any gains? 100% qual dividends is nice though
LTCG is the same as qualified dividends rates though, so it was even better than 60/40
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

muffins14 wrote: Wed Jun 07, 2023 10:07 pm
hiddenpower wrote: Wed Jun 07, 2023 10:04 pm
muffins14 wrote: Wed Jun 07, 2023 9:58 pm checking my 1099, all I can say is that I had dividends from NTSX, and 100% were qualified
But they weren't 60/40 treatment on the bond side. That's what I don't get about this fund. They should be able to structure a good chunk at LTCG, but is it just because there aren't any gains? 100% qual dividends is nice though
LTCG is the same as qualified dividends rates though, so it was even better than 60/40
LTCGs (and STCGs) can be offset by losses so pairs well with TLHing.

But yes, 100% qualified dividends are for the most part better than 60/40 under most circumstances. And it crushes non-qualified dividends you'd get from treasury ETFs. I just want to understand how it works and if this will continue or if there's internal losses or something in the fund that have negated yields.

NTSE is 30% qualified based on an old report, and NTSI is 90% qualified. In line with what one would expect for the underlying index.
Last edited by hiddenpower on Wed Jun 07, 2023 10:34 pm, edited 1 time in total.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

Yea you’re right, sorry. I’d love to know how other people tracked and reported that
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

muffins14 wrote: Wed Jun 07, 2023 10:32 pm Yea you’re right, sorry. I’d love to know how other people tracked and reported that
Well I'm not sure what's optimal comparing strictly between 60/40 vs qualified dividends. I think it's case by case. Maybe 60/40 when you have lots of TLH opportunities or losses accrued, and qualified dividends in all other situations?

Can't get around the dividends in the underlying funds anyway, but would like to understand what's happening behind the scenes a bit more.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

one other question here- NTSX is using middle of the curve ITTs. Given the 10Y treasury yield is 3.6% and the risk free rate is 5%, these treasury futures would be executing as a loss no? For example the 5% risk free rate cost should be baked into the price as should the lower yield. Thanks for explaining / confirming. I'm interested in executing a strategy like this myself one day.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Phyneas »

hiddenpower wrote: Thu Jun 08, 2023 12:51 pm one other question here- NTSX is using middle of the curve ITTs. Given the 10Y treasury yield is 3.6% and the risk free rate is 5%, these treasury futures would be executing as a loss no? For example the 5% risk free rate cost should be baked into the price as should the lower yield. Thanks for explaining / confirming. I'm interested in executing a strategy like this myself one day.
I don't have a direct answer to your question, but here is NTSX's sheet (PDF) on its financing costs and the implications the inverted yield curve negative carry have on its yield.

The NAV of NTSX should reflect only the market value of the S&P 500 stocks and the treasury futures that it holds, but the yield is definitely affected by the financing costs. I don't know if the financing costs can ever eat into the NAV the same way they do for daily resetting leveraged ETFs though.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by bgf »

Phyneas wrote: Thu Jun 08, 2023 2:16 pm
hiddenpower wrote: Thu Jun 08, 2023 12:51 pm one other question here- NTSX is using middle of the curve ITTs. Given the 10Y treasury yield is 3.6% and the risk free rate is 5%, these treasury futures would be executing as a loss no? For example the 5% risk free rate cost should be baked into the price as should the lower yield. Thanks for explaining / confirming. I'm interested in executing a strategy like this myself one day.
I don't have a direct answer to your question, but here is NTSX's sheet (PDF) on its financing costs and the implications the inverted yield curve negative carry have on its yield.

The NAV of NTSX should reflect only the market value of the S&P 500 stocks and the treasury futures that it holds, but the yield is definitely affected by the financing costs. I don't know if the financing costs can ever eat into the NAV the same way they do for daily resetting leveraged ETFs though.
If my math is right, looks like the futures are subtracting 0.68% from the yield. In other words, if the fund were just 90/10 equities 3month Tbills, the yield would be 1.91% but it’s actually 1.23% with the futures.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

hiddenpower wrote: Thu Jun 08, 2023 12:51 pm one other question here- NTSX is using middle of the curve ITTs. Given the 10Y treasury yield is 3.6% and the risk free rate is 5%, these treasury futures would be executing as a loss no? For example the 5% risk free rate cost should be baked into the price as should the lower yield. Thanks for explaining / confirming. I'm interested in executing a strategy like this myself one day.
NTSX actually uses a range of treasuries, not just 5/10 year. It’s 2,5,10,30 year treasury futures contracts.

But yea, it’s possible that sometimes borrowing short to invest long may not work
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by hiddenpower »

muffins14 wrote: Thu Jun 08, 2023 2:31 pm
hiddenpower wrote: Thu Jun 08, 2023 12:51 pm one other question here- NTSX is using middle of the curve ITTs. Given the 10Y treasury yield is 3.6% and the risk free rate is 5%, these treasury futures would be executing as a loss no? For example the 5% risk free rate cost should be baked into the price as should the lower yield. Thanks for explaining / confirming. I'm interested in executing a strategy like this myself one day.
NTSX actually uses a range of treasuries, not just 5/10 year. It’s 2,5,10,30 year treasury futures contracts.

But yea, it’s possible that sometimes borrowing short to invest long may not work
So the 5, 10 , 30 must be deep underwater purely when considering the financing costs of futures right now and the inverted yield?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

The collateral for the futures is also earning interest though, so that helps

But yes, I’m sure leveraged bonds have not been fun lately
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by beardsicles »

hiddenpower wrote: Thu Jun 08, 2023 2:33 pm
muffins14 wrote: Thu Jun 08, 2023 2:31 pm
hiddenpower wrote: Thu Jun 08, 2023 12:51 pm one other question here- NTSX is using middle of the curve ITTs. Given the 10Y treasury yield is 3.6% and the risk free rate is 5%, these treasury futures would be executing as a loss no? For example the 5% risk free rate cost should be baked into the price as should the lower yield. Thanks for explaining / confirming. I'm interested in executing a strategy like this myself one day.
NTSX actually uses a range of treasuries, not just 5/10 year. It’s 2,5,10,30 year treasury futures contracts.

But yea, it’s possible that sometimes borrowing short to invest long may not work
So the 5, 10 , 30 must be deep underwater purely when considering the financing costs of futures right now and the inverted yield?
Yeah. Add "the yield curve being inverted way way longer than anyone expected" to the list of oddities than can impact NTSX.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Admiral Fun »

Now that bond yields are favorable, is it time to take another look at this fund?

If ITTs are yielding 4% would the expected return on the 10% portion be 24%? (minus the added expense on the leveraged bond side, which is…?)

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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

Admiral Fun wrote: Sun Aug 20, 2023 7:02 am Now that bond yields are favorable, is it time to take another look at this fund?

If ITTs are yielding 4% would the expected return on the 10% portion be 24%? (minus the added expense on the leveraged bond side, which is…?)

Admiral Fun
Something like that. Remember it holds a range of treasury futures not just intermediate duration like ZN/ZF

If the mix was yielding %, it would indeed be 24% minus financing. That would mean it contributes 2.4% - costs to your return, plus whatever you get from 0.9*S&P500

Costs are not small right now, I believe, and that earlier post showed the bond yield was negative due to costs recently
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by tj »

Admiral Fun wrote: Sun Aug 20, 2023 7:02 am Now that bond yields are favorable, is it time to take another look at this fund?

If ITTs are yielding 4% would the expected return on the 10% portion be 24%? (minus the added expense on the leveraged bond side, which is…?)

Admiral Fun
Short term interest rates are higher than intermediate term interest rates at the moment, so I wouldn't think so.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Admiral Fun »

tj wrote: Sun Aug 20, 2023 9:09 am Short term interest rates are higher than intermediate term interest rates at the moment, so I wouldn't think so.
NTSX duration on the bond side is around 7 years. The bond index it tracks is yielding of over 4%.
https://www.ssga.com/uk/en_gb/instituti ... st-spp7-gy

Does it matter if short term rates are more?

What would be your expected return for the bond side of NTSX?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Admiral Fun »

muffins14 wrote: Sun Aug 20, 2023 8:41 am
Admiral Fun wrote: Sun Aug 20, 2023 7:02 am Now that bond yields are favorable, is it time to take another look at this fund?

If ITTs are yielding 4% would the expected return on the 10% portion be 24%? (minus the added expense on the leveraged bond side, which is…?)

Admiral Fun
Something like that. Remember it holds a range of treasury futures not just intermediate duration like ZN/ZF

If the mix was yielding %, it would indeed be 24% minus financing. That would mean it contributes 2.4% - costs to your return, plus whatever you get from 0.9*S&P500

Costs are not small right now, I believe, and that earlier post showed the bond yield was negative due to costs recently
My quick math says that including the leveraged bonds adds an expense ratio of .173% to the bond side (assuming the S&P500 side has an expense simliar to VOO, or .03). 90% of .03 plus 10% of .173 = .2.

Expected return of 24% on the bond side minus 1.73 expenses is just over 22% expected return. Compare to maybe 6.5% expected return for S&P500. Am I missing something?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by tj »

Admiral Fun wrote: Sun Aug 20, 2023 9:21 am
tj wrote: Sun Aug 20, 2023 9:09 am Short term interest rates are higher than intermediate term interest rates at the moment, so I wouldn't think so.
NTSX duration on the bond side is around 7 years. The bond index it tracks is yielding of over 4%.
https://www.ssga.com/uk/en_gb/instituti ... st-spp7-gy

Does it matter if short term rates are more?

What would be your expected return for the bond side of NTSX?
Of course it matters. The fund is borrowing at very short term rates (5% plus) to invest at intermediate term rates.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

Admiral Fun wrote: Sun Aug 20, 2023 9:27 am
muffins14 wrote: Sun Aug 20, 2023 8:41 am
Admiral Fun wrote: Sun Aug 20, 2023 7:02 am Now that bond yields are favorable, is it time to take another look at this fund?

If ITTs are yielding 4% would the expected return on the 10% portion be 24%? (minus the added expense on the leveraged bond side, which is…?)

Admiral Fun
Something like that. Remember it holds a range of treasury futures not just intermediate duration like ZN/ZF

If the mix was yielding %, it would indeed be 24% minus financing. That would mean it contributes 2.4% - costs to your return, plus whatever you get from 0.9*S&P500

Costs are not small right now, I believe, and that earlier post showed the bond yield was negative due to costs recently
My quick math says that including the leveraged bonds adds an expense ratio of .173% to the bond side (assuming the S&P500 side has an expense simliar to VOO, or .03). 90% of .03 plus 10% of .173 = .2.

Expected return of 24% on the bond side minus 1.73 expenses is just over 22% expected return. Compare to maybe 6.5% expected return for S&P500. Am I missing something?
Your math would be if the fund was 600% treasuries and 90% stocks.

NTSX is 60% treasures and 90% stocks

I also think you may be underestimating the current cost of leverage
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kevinf
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by kevinf »

We're at the 5 year mark for NTSX now as it was introduced in Aug 2018. Here's to another 5 years! :beer
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

kevinf wrote: Sun Aug 20, 2023 12:01 pm We're at the 5 year mark for NTSX now as it was introduced in Aug 2018. Here's to another 5 years! :beer
I do like the fund. I sort of feel that I am overpaying due to the expense ratio, but rolling your own futures contracts is yet another thing to keep track of…

NTSX is currently 20% of my portfolio, and I hold it in my Roth
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Admiral Fun »

muffins14 wrote: Sun Aug 20, 2023 9:43 am I also think you may be underestimating the current cost of leverage
What are your return expectations for the bond side after all costs?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

Admiral Fun wrote: Sun Aug 20, 2023 1:49 pm
muffins14 wrote: Sun Aug 20, 2023 9:43 am I also think you may be underestimating the current cost of leverage
What are your return expectations for the bond side after all costs?
Long-term, I expect a $1 investment in NTSX to return about the same as a $0.60 allocation to intermediate term treasuries. I treat it as 90% US stocks and 60% bonds in my allocation

If you look at that data as of august 11:
https://www.wisdomtree.com/investments/ ... s-ntsx.pdf

You see the bond overlay has negative yield, and the cash collateral is positive yield, so the current expected return (per the yield) is basically zero.

I expect that to change when either short term yields fall or long term yields rise more
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by RosieQ »

muffins14 wrote: Sun Aug 20, 2023 2:03 pm
Admiral Fun wrote: Sun Aug 20, 2023 1:49 pm
muffins14 wrote: Sun Aug 20, 2023 9:43 am I also think you may be underestimating the current cost of leverage
What are your return expectations for the bond side after all costs?
Long-term, I expect a $1 investment in NTSX to return about the same as a $0.60 allocation to intermediate term treasuries. I treat it as 90% US stocks and 60% bonds in my allocation

If you look at that data as of august 11:
https://www.wisdomtree.com/investments/ ... s-ntsx.pdf

You see the bond overlay has negative yield, and the cash collateral is positive yield, so the current expected return (per the yield) is basically zero.

I expect that to change when either short term yields fall or long term yields rise more
I really like this data sheet which is updated weekly I think. My read for this is that NTSX has a net negative drag from the bond portion of the portfolio of -0.75% (not the 4% plus as mentioned above) which is because this is futures contracts and they are what they are. However this is balanced by the short term rates benefiting the cash collateral which is yielding 5.43%. Net yield of 1.37% compared to the SP500 dividend yield of 1.48% so essentially a 0.11% extra fee on top of the 0.2% management fee inherent to the fund. I see that 0.11% as "crash insurance" assuming bonds start behaving more typically with positive returns as rates drop during a crisis.

Any idea how often or historically what rate the bond overlay has typically contributed? Has it always been negative and what has the range been? I only found this Wisdomtree link in 2022 which the rate rise was in full force.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by slicendice »

This fund is great in the Roth, getting one exposure to the boring stuff in an efficient manner making room to invest in other things. I do 50% NTSX/NTSI, 50% the Avantis SCV trinity. I also like it in taxable because it seems to be a pretty efficient way to get treasury exposure there, combined with I bonds it allows me to hold less of a straight treasury or muni bond funds in taxable than I otherwise would. I also like that it takes care of rebalancing in taxable in an efficient way.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Admiral Fun »

muffins14 wrote: Sun Aug 20, 2023 2:03 pm
If you look at that data as of august 11:
https://www.wisdomtree.com/investments/ ... s-ntsx.pdf

You see the bond overlay has negative yield, and the cash collateral is positive yield, so the current expected return (per the yield) is basically zero.

I expect that to change when either short term yields fall or long term yields rise more
So if yield curve stays as it is the bond overlay never makes money? Even with rates as high as they are? This fund is more complex than I first thought.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

Admiral Fun wrote: Mon Aug 21, 2023 8:26 pm
muffins14 wrote: Sun Aug 20, 2023 2:03 pm
If you look at that data as of august 11:
https://www.wisdomtree.com/investments/ ... s-ntsx.pdf

You see the bond overlay has negative yield, and the cash collateral is positive yield, so the current expected return (per the yield) is basically zero.

I expect that to change when either short term yields fall or long term yields rise more
So if yield curve stays as it is the bond overlay never makes money? Even with rates as high as they are? This fund is more complex than I first thought.
That’s my interpretation of the pdf. I could be wrong.

Short-term rates are really high right now, which makes borrowing expense. Futures costs are like margin, which is like a mortgage. Borrowing isn’t ever free, and in 2023 it’s particularly expensive to borrow.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by tj »

Admiral Fun wrote: Mon Aug 21, 2023 8:26 pm
muffins14 wrote: Sun Aug 20, 2023 2:03 pm
If you look at that data as of august 11:
https://www.wisdomtree.com/investments/ ... s-ntsx.pdf

You see the bond overlay has negative yield, and the cash collateral is positive yield, so the current expected return (per the yield) is basically zero.

I expect that to change when either short term yields fall or long term yields rise more
So if yield curve stays as it is the bond overlay never makes money? Even with rates as high as they are? This fund is more complex than I first thought.
I would have thought that was obvious (and the opposite of complex). Short term rates are higher than long term rates. You are borrowing at a high rate to earn a lower rate. Maybe the equity exposure makes up for it, but it seems like a no brainer to market time this fund based on the spread between short and long yields.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

tj wrote: Mon Aug 21, 2023 9:32 pm
Admiral Fun wrote: Mon Aug 21, 2023 8:26 pm
muffins14 wrote: Sun Aug 20, 2023 2:03 pm
If you look at that data as of august 11:
https://www.wisdomtree.com/investments/ ... s-ntsx.pdf

You see the bond overlay has negative yield, and the cash collateral is positive yield, so the current expected return (per the yield) is basically zero.

I expect that to change when either short term yields fall or long term yields rise more
So if yield curve stays as it is the bond overlay never makes money? Even with rates as high as they are? This fund is more complex than I first thought.
I would have thought that was obvious (and the opposite of complex). Short term rates are higher than long term rates. You are borrowing at a high rate to earn a lower rate. Maybe the equity exposure makes up for it, but it seems like a no brainer to market time this fund based on the spread between short and long yields.
I think it’s really not possible to successfully market time the yield curve on an ongoing basis.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by tj »

muffins14 wrote: Mon Aug 21, 2023 10:05 pm
tj wrote: Mon Aug 21, 2023 9:32 pm
Admiral Fun wrote: Mon Aug 21, 2023 8:26 pm
muffins14 wrote: Sun Aug 20, 2023 2:03 pm
If you look at that data as of august 11:
https://www.wisdomtree.com/investments/ ... s-ntsx.pdf

You see the bond overlay has negative yield, and the cash collateral is positive yield, so the current expected return (per the yield) is basically zero.

I expect that to change when either short term yields fall or long term yields rise more
So if yield curve stays as it is the bond overlay never makes money? Even with rates as high as they are? This fund is more complex than I first thought.
I would have thought that was obvious (and the opposite of complex). Short term rates are higher than long term rates. You are borrowing at a high rate to earn a lower rate. Maybe the equity exposure makes up for it, but it seems like a no brainer to market time this fund based on the spread between short and long yields.
I think it’s really not possible to successfully market time the yield curve on an ongoing basis.
Maybe not, but there are points in time where it seems actionable.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by Admiral Fun »

Is anyone waiting for the yield curve to normalize before buying this fund?
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by muffins14 »

Admiral Fun wrote: Wed Sep 27, 2023 7:08 am Is anyone waiting for the yield curve to normalize before buying this fund?
More than zero people are doing that. The problem is that by waiting you would then miss out on the price appreciation. It is difficult to time the bond market, in my opinion, but people are smarter than me
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by tj »

Admiral Fun wrote: Wed Sep 27, 2023 7:08 am Is anyone waiting for the yield curve to normalize before buying this fund?
There are comments literally right above yours that discuss this.
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Re: WisdomTree 90/60 US Efficient Core Fund [NTSX] (formerly US Balanced Fund)

Post by tj »

muffins14 wrote: Wed Sep 27, 2023 8:02 am
Admiral Fun wrote: Wed Sep 27, 2023 7:08 am Is anyone waiting for the yield curve to normalize before buying this fund?
More than zero people are doing that. The problem is that by waiting you would then miss out on the price appreciation. It is difficult to time the bond market, in my opinion, but people are smarter than me
The futures that NTSX hold benefit from interest rate reductions in the same way that normal bonds do?
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