Investors are Simplifying Their Portfolios with Blended ETFs

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We live in a world dominated by money and convenience.

We’re looking to get rich quickly, implement the latest life hacks, and optimize every moment of our time. Well, a large number of us at least. We seek products and services that align with our desire for financial security and a life of leisure. That’s where blended ETFs come in – even more convenient than a traditional ETF. While most ETFs seek to diversify holdings within a single industry, sector, or grouping of assets, blended ETFs combine asset classes that would typically be separated. Think stocks and commodities together, even cryptocurrencies. These funds allow for portfolio diversification in a single financial instrument – saving us time and making us money.

We’ll touch on a few blended ETFs that are offering investors split exposure to a variety of sectors.

The Digital Funds S&P 500 Bitcoin 75/25 Index ETF

This ETF is not yet launched but was recently filed by a new digital asset manager. As the name suggests, it’s a fund that invests 75% into top S&P 500 companies and 25% into Bitcoin futures contracts. It’s important to note that the fund does not invest directly into Bitcoin – it does so through futures contracts and other countries’ ETFs.

The fund’s portfolio manager, Michael Willis, said that the S&P 500 investment provides some stability to the very volatile cryptocurrency market. While the two are quite correlated, the fund’s 75/25 split reduces the volatility through its majority holding being in the traditional financial market.

The two are seen as the leading assets for their respective domains, the S&P 500 for Wall Street and Bitcoin for the greater cryptocurrency market. Digital Funds hopes to launch a spot bitcoin ETF sometime soon, but SEC regulatory hurdles have not yet made this possible for any entity.

If you’re seeking seamless exposure to the cryptocurrency market without having to fully dive in, this ETF serves as a valuable instrument.

WisdomTree Efficient Gold Plus Equity Strategy Fund

WisdomTree’s GDE fund offers simultaneous exposure to large-cap U.S. equities and U.S.-listed gold futures. As the world navigates turbulent times, commodities like gold are often sought out to hedge against inflation and geopolitical concerns. WisdomTree aimed to simplify the investment process by bringing equities and gold together into a single fund.

The fund made a solid case for hedging with gold. Their analysts provided this chart detailing the performance of gold during the S&P 500’s 20 worst quarters.

Performance of physical gold during worst 20 S&P 500 quarters, courtesy of WisdomTree & Bloomberg

During these 20 quarters, gold outperformed the S&P 500 by over 18%. Gold has also historically performed well during times of heightened inflation and economic activity, according to their findings.

GDE offers exposure to the top 500 U.S. equities by market capitalization alongside its gold exposure. An investment of $100 would be dispersed as follows: $90 to large-cap U.S. equities, $10 to short-term collateral, and $90 to gold futures layered on top. This yields $180 of exposure to equities and gold.

This is made possible by the fund trading on 1.8x leverage, which magnifies gains and losses (increasing risk). WisdomTree provides a rather unique ETF type with its gold hedge. If you’re bullish on the U.S. equities markets and commodity prices long-term, GDE is a smooth vehicle to gain exposure.


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