These Leveraged ETFs are Designed for Long-Term Investors

WisdomTree U.S. Efficient Core Fund

NTSX

-0.04%

NTSX is the cleanest and simplest example of leverage used for long-term portfolio construction. Formerly known as the WisdomTree 90/60 U.S. Balanced Fund, the old name made the strategy explicit.

The ETF starts with a traditional 60/40 portfolio of U.S. large-cap equities and intermediate-term Treasuries, then applies modest 1.5x leverage to scale the exposures.

In practice, that means roughly 90% notional exposure to U.S. stocks and 60% to U.S. Treasuries, for a total notional exposure of about 150%. The leverage is achieved on the bond side using Treasury futures, while the equity sleeve remains fully funded and physically held.

The logic is straightforward. Outside of extreme years such as 2022, the 60/40 portfolio has historically sat close to the efficient frontier, delivering a strong balance of risk and return.

By applying low-cost leverage, NTSX scales that mix toward an expected return closer to a 100% equity portfolio, but with the potential for lower volatility, assuming stock–bond correlations behave as they have historically.

What makes NTSX particularly compelling is how conservative and transparent the implementation is. Treasury futures are among the most liquid derivatives in the world and the structure avoids unnecessary complexity. The use of futures also brings tax efficiency compared with holding leveraged cash bond positions.

Costs are reasonable for what the fund delivers. NTSX charges a 0.20% expense ratio and currently offers a 1.08% 30-day SEC yield. It is a good illustration that leverage, when used carefully and cheaply, does not have to be speculative or short term in nature.

SPDR Bridgewater All Weather ETF

ALLW

-0.17%

ALLW is far more complex than NTSX. It is an actively managed ETF with a 0.85% expense ratio, and it implements the well-known All Weather strategy developed by Bridgewater Associates, the hedge fund founded by Ray Dalio. Dalio is widely known for his work on macro investing, economic cycles, and systematic portfolio construction, themes that underpin this strategy.

The objective of the All Weather approach is to build a single portfolio designed to perform across a wide range of economic environments. That includes periods of rising or falling inflation, as well as expansions and recessions. Rather than making a directional macro bet, the portfolio is structured so that different assets respond positively to different economic regimes.

As of February 9, the portfolio had approximately 70.52% exposure to global nominal bonds, primarily sovereign issuers rather than corporate credit. It also had 43.33% exposure to global equities, 39.46% to inflation-linked bonds through TIPS, and 33.3% to commodities, including a dedicated gold sleeve.

Added together, these exposures exceed 100%, totaling roughly 188% of notional exposure. That is because the fund relies heavily on futures and swaps to implement the strategy.

At first glance, the heavy bond exposure can look counterintuitive. That allocation is intentional. ALLW is a risk parity portfolio. Instead of weighting assets by capital, it weights them by their contribution to overall portfolio risk.

Bonds are less volatile than equities, so they must be held in larger size for their expected risk contribution to match that of stocks or commodities. Once those risk contributions are equalized, leverage is applied to scale the portfolio to a higher expected return.

A key distinction between ALLW and older index-based risk parity ETFs is the role of active inputs. Rather than relying solely on backward-looking volatility and correlation estimates, ALLW incorporates a proprietary, continuously updated model from Bridgewater. State Street handles the ETF implementation and trading, while Bridgewater provides the macro framework and allocation guidance.

The result is a sophisticated, institutionally inspired portfolio delivered in an ETF wrapper. That sophistication comes with higher costs and less transparency than simpler leveraged solutions, but it also offers a more dynamic and forward-looking approach to managing risk across economic regimes.

PIMCO US Stocks PLUS Active Bond ETF

SPLS

-0.2%

I have long followed the PIMCO StocksPLUS Long Duration Fund (PSLDX). It is an institutional class mutual fund that combines leveraged exposure to two core assets.

The portfolio targets roughly 100% exposure to large-cap U.S. equities and another 100% exposure to long-term U.S. Treasuries. Outside of periods like 2022, when stock and bond correlations turned positive, that structure has historically delivered good risk adjusted returns.

PSLDX, however, comes with several drawbacks for most investors. As an institutional mutual fund, it carries minimum investment requirements. The mutual fund structure also lacks in-kind creation and redemption, which has historically resulted in sizable taxable capital gains distributions. At present, the trailing 12-month distribution yield sits around 12.75%.

PIMCO has now brought a variation of that strategy into an ETF wrapper with SPLS. The equity sleeve provides exposure to large-cap U.S. stocks that closely resembles the S&P 500. The fixed income sleeve reflects PIMCO’s active bond management, an approach the firm often refers to as portable alpha.

In a nutshell, SPLS pairs passive equity exposure with actively managed fixed income strategies, implemented through swaps, options, and allocations to PIMCO-managed bond portfolios, with the goal of generating incremental returns independent of equity market direction.

SPLS addresses several limitations with PSLDX. First, in-kind creation and redemption should materially reduce taxable capital gains distributions. Moreover, the dynamic bond allocation in SPLS is also more flexible than the long-duration bias embedded in PSLDX.

Active management allows PIMCO to adjust duration, rotate across sectors, manage yield curve exposure, and use derivatives to fine-tune interest rate and credit risk as conditions change. That flexibility may prove beneficial in environments where rates are volatile or rising.

Costs are another differentiator. SPLS carries a 0.43% gross expense ratio, which is contractually waived down to 0.18%. That places it below even NTSX on headline fees.

Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.