WisdomTree Efficient Gold Plus Equity Strategy Fund

GDE

Market cap $411M

This year, investors have been rewarded by equities and gold. As of October 8, the S&P 500 was higher by nearly 16% YTD.

WisdomTree Efficient Gold Plus Equity Strategy Fund (GDE) offers leveraged exposure to both gold and equities, benefiting from current macroeconomic conditions. GDE is well-positioned as gold prices rise, supported by falling oil prices, strong ETF inflows, central bank buying, and tight silver markets. The traditional gold-real yield relationship has weakened, with gold now driven by global tensions, central bank demand, and a weakening U.S. dollar.

Independent recognition. Innovative strategies.

The implicit leverage mechanism inside GDE makes it a puzzle piece of my portfolio that I had been looking for some time. The structure built around GDE allows the introduction of gold's functions (hedging) into an equity-oriented portfolio. Which, in my opinion, makes it interesting as a satellite component of the portfolio, considering the active management and the implicit leverage.

I have a buy rating on GDE, citing its strong risk-adjusted returns and efficient exposure to both US large-cap stocks and gold. GDE has outperformed both gold and the S&P 500 since March 2024, returning 90% versus 55% and 27%, respectively. The ETF offers capital-efficient diversification, low expenses, and robust technical momentum, although liquidity concerns warrant using limit orders.

Gold is the best-performing major asset this year, enjoying a comfortable lead over its nearest competitors. Obviously, that's good news for holders of physical gold as well as investors engaged with related ETFs.

When allocating to alternative investments, like gold, market participants often grapple with how much of their portfolios should be devoted to those assets. They also wonder whether it's their equity or fixed income sleeves that will be subject to pruning.

GDE offers a unique blend of US large cap equities and gold futures for inflation protection and diversification. The fund achieves capital efficiency by leveraging gold futures, resulting in 180% notional exposure while maintaining risk balance due to lower correlation. Active management and periodic rebalancing help GDE adapt to sector rotation and market changes, with a growth and tech bias.

Despite my preference for individual stocks, I've added Schwab's U.S. Large-Cap Growth ETF to address my portfolio's lack of tech sector exposure. With inflation creeping up and potential tariffs on the horizon, investors might consider dividend-focused stocks as safe-havens in a high inflation environment. The Putnam BDC Income ETF offers a near 9% yield and includes high-quality BDCs like Ares Capital, Blackstone Secured Lending, and Main Street Capital.

GDE offers a low correlation with US stocks, reducing portfolio risk, though it slightly lowers CAGR. GDE invests $90 in large-cap US equities and $90 in gold futures, leveraging exposure to $180, enhancing returns during gold's strong performance. GDE outperformed SPY and GLD in the past year due to gold's 44% rise; rated Buy, but reduce exposure if gold cools.