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Tuesday, June 13, 2006

A Better Way to Index?

Reported by Marie Glancy

WisdomTree Investments, a New York-based investment advisory firm backed largely by famed hedge fund manager Michael Steinhardt, this week launches its own family of 20 ETFs with, company officials say, "the potential to change the way people think about indexing and investing." The 6 domestic and 14 international products will trade on the NYSE starting Friday.

In a conference call Tuesday, the firm's investment strategy advisor, Wharton professor Jeremy Siegel, explained how he and founder Jonathan Steinberg began collaborating: each felt, based on independently conducted research, that better returns could be delivered through indexes weighted according to dividend pay rather than market capitalization.

"We believe these are going to be very exciting, and substitutes for the standard cap weighting products," he said. Steinberg said the firm believes it's found "a better way to index."

The new family also contains what company leaders say is the first international small cap ETF on the market. In addition to large, small and mid cap dividend indexes, the mix includes two specialized indexes composed of high-yielding dividend stocks.

Expense ratios stand at 28-38 basis points for the domestic ETFs and 48-58 for international. Bank of New York will provide sub-advisory, custody and accounting services.

Steinberg was once the publisher of defunct magazine Individual Investor, and has brought former editor Luciano Siracusano on board at WisdomTree. Known as Index Development Partners until September 2005, the company completed financing from a group of investors led by Steinhardt in late 2004, with the intention of sponsoring ETFs. As well the company's major backer, Steinhardt is also its non-executive chairman.  

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