WisdomTree’s GDE and GDMN: Solving the Gold Allocation Problem Through Capital Efficiency

For years, financial advisors have fielded a persistent request from clients: add gold to the portfolio. The conversation typically ends in compromise—either sacrifice equity exposure to make room for the precious metal or explain once again why gold doesn’t fit the allocation model. Jeremy Schwartz, Global Chief Investment Officer at WisdomTree, thinks advisors can finally stop having that argument.

“You get to get your gold without sacrificing your stocks,” Schwartz says. The solution comes through two exchange-traded funds that layer gold exposure onto existing equity positions using gold futures contracts (the funds do not hold physical gold): the WisdomTree Efficient Gold Plus Equity Strategy Fund (ticker: GDE) and the WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (ticker: GDMN). Both funds aim to solve what Schwartz calls a “core problem” in portfolio construction—advisors know clients want gold exposure, but making room for the asset class traditionally means selling positions they believe in.

The Capital Efficiency Problem
Traditional portfolio construction often forces uncomfortable choices. Adding gold typically requires liquidating stocks or bonds, creating a capital efficiency problem that has frustrated advisors for decades. Schwartz traces the genesis of WisdomTree’s solution back seven or eight years, when the firm began exploring how to create unique exchange-traded fund (ETF) structures that could free up portfolio space.

The challenge extends beyond gold. Diversifiers such as managed futures often struggle to gain traction in portfolios. “They often are complex. They’re hard to put in portfolios,” he explains. “What are you going to sell to make room for the diversifier is a core problem.”

WisdomTree’s initial experiments involved stock and bond futures in a 90/60 combination. The logic was elegant: two-thirds of a 90/60 portfolio delivers the traditional 60/40 allocation, leaving one-third of the portfolio available for other strategies. “Now you have a third-year portfolio freed up to do other things,” Schwartz says.

Advisors could maintain their conviction in long-term equity returns—a thesis supported by decades of research from Wharton Professor Emeritus Jeremy Siegel, with whom Schwartz has collaborated for 25 years—while gaining exposure to diversifying assets.

The approach has resonated. “We’ve now a few billion dollars in the concept,” Schwartz says, referring to WisdomTree’s capital efficiency strategies. Another breakthrough came when Schwartz and his team applied the framework to gold.

Gold’s Evolving Case
Gold’s reputation as a static store of value has obscured its potential as a genuine portfolio diversifier. Although traditional investment wisdom has often dismissed the metal as yielding minimal real returns over centuries, recent decades tell a more compelling story.

“So, the last 50 years, it’s looked better than bonds measured after inflation,” Schwartz says. “But I do think this opens new ways that you don’t have to sell your core stocks and bonds.”

Recent price action strengthens the investment case. Gold has surged in 2025, driven primarily by central bank buying rather than retail ETF flows. “It is not often you see gold and stocks go together,” he notes. The simultaneous rally in both asset classes represents an unusual market dynamic. Central banks have been the key drivers, and Schwartz points to an intriguing shift in global reserve composition: “In central bank reserve assets, golds are now being held even more than Treasuries.”

The metal’s correlation characteristics make the asset particularly attractive for portfolio diversification. According to WisdomTree research, during the 20 worst quarters for the S&P 500 since 1967, gold returned positive performance in 15 instances and outperformed by an average of 18.2%. In the first quarter of 2020, as COVID-19 devastated equity markets, gold returned 6.22% while the S&P 500 fell 19.6%. Gold’s five-year rolling correlation with U.S. equities has remained below 20% for more than three decades, second only to U.S. Treasuries among major asset classes.

But the defensive characteristics tell only part of the story. Gold has also performed well during periods of strong economic activity with elevated inflation, serving as an inflation hedge while companies grow earnings. The appeal extends beyond tactical positioning or inflation paranoia, Schwartz argues. Concerns about fiscal deficits, government spending, and bond market vulnerability all create rational reasons for gold exposure. “It doesn’t have to be just for the quote, unquote ‘gold bug,’” Schwartz says. “There’s multiple reasons to be thinking about it.”

GDE: Gold Plus Large-Cap Equities
GDE represents WisdomTree’s most straightforward application of capital efficiency to gold exposure. The strategy aims to address the capital efficiency challenge by combining large-cap U.S. equity exposure with gold futures. The structure allocates approximately $90 to the 500 largest U.S. stocks and $10 to short-term collateral for every $100 invested. The portfolio then layers $90 in gold futures on top, creating $180 in total exposure with a single capital outlay.

Schwartz acknowledges the strategy involves leverage but reframes the concept around portfolio construction flexibility. “It’s for sure a version of leverage—we call it capital efficient—but you’re getting the extra gold without slowing something,” he says. “That word ‘leverage’ sounds scary to a lot of people. But if you’re just looking for, ‘I want to preserve some of my traditional diversification of stocks and bonds in a portfolio, just create more room for gold,’ there’s a number of ways to do it.”

The strategy does not rebalance futures daily, thus avoiding the path dependency issues and compounding problems often associated with daily-reset leveraged products. “This is rebalancing the futures on a quarterly basis,” Schwartz explains. “So, it’s a very different dynamic.”

The structure might particularly appeal to advisors managing clients with strong equity convictions who have nonetheless demanded gold exposure for years. “Adding gold on top of, say, large-cap equities like we do with GDE has been a very, very popular idea,” says Schwartz. The combination aims to create a layered inflation protection strategy that can preserve equity’s long-term purchasing power advantages while adding gold’s hedging characteristics.

“While companies’ purchasing power grows over time—that is what we think is one of the best hedges for inflation—this adds further inflation hedging potential with the gold futures on top of the broad equities,” he adds.

Historical simulations support the approach. According to WisdomTree data, from November 1999 through September 2025, a 90/90 combination of gold and S&P 500 exposure might have generated a 14.8% annualized return with 20.4% volatility, producing a Sharpe ratio[1] of 0.63. By comparison, the S&P 500 alone delivered an 8.3% return with 15.1% volatility and a 0.42 Sharpe ratio over the same period.

GDMN: Adding the Miners
While GDE focuses on large-cap equities, GDMN targets a specialized corner of the equity market. Gold mining equities present a distinct opportunity set. The stocks have historically exhibited characteristics between pure equities and physical gold—more correlated with equities than with gold itself but with exposure that can dampen drawdowns relative to broad equity indices while boosting positive performance relative to physical gold.

Mining companies have struggled with their reputation over the past two decades. Investors question management discipline, capital allocation decisions, and commitment to shareholder returns through dividends and buybacks. However, rising gold prices have fundamentally improved the sector’s profitability outlook.

Schwartz points to expanding net profit margins since 2016, coinciding with increased capital expenditures. “But now, as gold prices rise, their margins do expand, and you’re seeing it,” he says. “So, profits are expanding with this moving gold.”

GDMN combines a modified market-cap-weighted basket of global gold mining equities with gold futures exposure. The fund invests approximately $90 in miners and $10 in short-term collateral per $100, then overlays $90 in gold futures for comprehensive exposure to both the physical metal and the companies extracting the metal.

Many gold-oriented investors already hold separate positions in physical gold and mining equities. “When you look at the shareholders of both, they’re sort of diversifying,” Schwartz notes. “Do they just want the gold direct exposure plus the companies operating in that space if they have a more bullish outlook on the space? So, we just combine them into one.”

The capital efficiency framework makes the combination more accessible, he believes. “You could get both with one trade, put up a little bit less money to get the same concept.”

GDMN’s trajectory reflects growing advisor interest in the strategy. As Schwartz points out, the fund has expanded from an initial $15 million to $20 million in assets to approximately $150 million, as of September 2025. “You’ve seen days where it can trade $10 million to $20 million and handle the capacity very easily because these stocks are very liquid and the futures are very liquid,” he says. “So, I call it a real ETF now. It should be on more people’s radars.”

Schwartz acknowledges GDMN occupies a more specialized role than GDE. “You could say it’s more tactical,” he notes, positioning the fund as potentially appropriate for investors with particularly bullish views on gold or those seeking enhanced exposure to the mining sector alongside the physical metal.

Implementation Considerations
Both funds trade on Cboe. Their goals are to deliver their exposures through quarterly rebalancing of futures positions and create flexibility for portfolio construction vi WisdomTree’s capital efficiency framework.

Advisors can use GDE as a substitute for large-cap U.S. equity exposure while simultaneously gaining gold diversification, or implement GDMN as a more targeted allocation for clients seeking comprehensive gold-oriented exposure. Neither approach requires advisors to sacrifice existing positions or articulate why clients cannot have the gold exposure they have been requesting.

Schwartz emphasizes that the funds can serve broader portfolios than just those of gold enthusiasts. “It’s not just the bugs. It’s everybody,” he says. “This is an uncorrelated asset class, and those things are precious.” In an environment where traditional 60/40 portfolios face challenges from correlated stock and bond movements, uncorrelated return streams command increasing attention. The firm continues developing capital-efficient strategies, with Schwartz promising “more to come” from WisdomTree’s innovation pipeline.

Gold exposure no longer requires portfolio compromise. Advisors can finally tell clients yes—they can have their gold alongside their equity exposure, integrated into a single position that seeks to deliver both return streams efficiently. After years of uncomfortable conversations, the gold question may have found its answer.