As the taper begins to ravage international markets, investors in
the ETF world are starting to see the impact of currencies on
foreign holdings. Many currencies are slumping against the U.S.
dollar, and this is really having a huge negative impact on stock
prices when investors adjust returns back to American currency.
Thanks to this currency slide and the possibility of a strong
dollar, investors are starting to embrace currency-hedged ETFs in
droves. Several have proven their worth over the past few months
and they have really begun to build up assets as a result, leading
other ETF issuers to consider jumping in on the market as well (see
all the Top Ranked ETFs here).
This trend has recently hit iShares, the world’s biggest provider
of ETFs, prompting the firm to put out its first three currency
hedged ETFs on the market. Below, we highlight these new funds from
iShares in this currency-hedged market, and their main competitors
for assets in this increasingly fierce space for investors who are
looking to get in on this growing trend as well:
iShares Currency Hedged MSCI EAFE ETF: HEFA
For a broad foreign market play without the currency risks,
investors could consider HEFA which focuses on the EAFE
region—Europe, Australasia, Far East—for exposure. This product
follows the MSCI EAFE 100% Hedged to USD index, holding just over
900 securities in its basket and charging a pretty low 39 basis
points a year in fees.
The product is basically a holding of
EFA with a
currency hedged tacked on, giving it a focus on financials,
industrials, and consumer stocks. Top nations include the UK,
Japan, and Switzerland, while France and Germany round out the top
five for this well-diversified fund (see all the Broad Developed
World ETFs here).
EAFE Hedged ETF Competition: While there are a few
European hedged ETFs on the market, there is really only one direct
competitor at this time, the
db X-trackers MSCI EAFE
Currency Hedged Equity Fund (DBEF). This product is pretty
popular too, as it has over $300 million in AUM, and a solid volume
level as well, suggesting it will be a tough foe for HEFA.
iShares Currency Hedged MSCI Germany ETF: HEWG
This fund gives investors exposure to the German market without
worrying about the influence of the euro’s fluctuations. The
product charges investors 53 basis points a year in fees and it
tracks the MSCI Germany 100% Hedged to USD Index.
This ETF is a play on iShares’ ultra-popular
EWG
with a hedge to strip out the euro currency exposure. As such, the
fund holds about 60 securities in its basket with a focus on
consumer discretionary, financials, and basic materials (see 7 ETFs
to Buy in 2014).
Germany Hedged ETF Competition: There are
currently two products in this space,
DBGR and
DXGE. While neither has developed a huge following
the db X-trackers MSCI Germany Hedged Equity Fund (DBGR) currently
has the lead in the space with about $40 million in AUM.
iShares Currency Hedged MSCI Japan ETF: HEWJ
This ETF looks to match the local currency performance of stocks in
Japan, allowing investors to take the yen out of Japan investing.
The product charges investors 48 basis points a year in fees and it
follows the MSCI Japan 100% Hedged to USD net TR Index.
The ETF is basically an investment in
EWJ but with
a currency hedge, holding over 300 stocks in its basket. Exposure
is tilted towards consumer, industrial, and financial stocks, while
Toyota Motor (TM) takes the top spot at just over
6% of assets.
Japan Hedged ETF Competition: The Japan hedged ETF
market and it is currently dominated by
DBJP and
DXJ, though the lion’s share of the assets goes
towards WisdomTree’s DXJ. This fund has close to $12 billion in
assets under management, and it is actually approaching EWJ as the
most popular Japan-focused ETF on the market (See 2 Japan Hedged
ETFs for 2014).
Bottom Line
The currency-hedged ETF competition is really heating up and it is
hard to say how many more funds the space can take for now. This is
especially true considering that some markets, such as Japan, have
already seen huge moves in their currency, while others, like
Germany, haven’t really ever seen a big currency loss (at least in
modern times).
Given this, it is hard to say how these new funds will compete,
particularly considering the entrenched competition in some of the
key markets. Still, it is iShares, and they tend to compete very
well in every market so I wouldn’t count out these funds and the
iShares machine just yet.
Want the latest recommendations from Zacks Investment Research?
Today, you can download
7 Best Stocks for the Next 30
Days.
Click to get this free report
>>
Author is long EWG
DB-XT MS EA HDG (DBEF): ETF Research Reports
DB-XT MS GER HD (DBGR): ETF Research Reports
WISDMTR-J HEF (DXJ): ETF Research Reports
ISHARS-EAFE (EFA): ETF Research Reports
ISHARS-GERMANY (EWG): ETF Research Reports
ISHARS-JAPAN (EWJ): ETF Research Reports
ISHA-CH MS EAFE (HEFA): ETF Research Reports
ISHA-CH MS GERM (HEWG): ETF Research Reports
ISHA-CH MS JAP (HEWJ): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days. Click
to get this free report
Xtrackers MSCI EAFE Hedg... (AMEX:DBEF)
Historical Stock Chart
From Nov 2024 to Dec 2024
Xtrackers MSCI EAFE Hedg... (AMEX:DBEF)
Historical Stock Chart
From Dec 2023 to Dec 2024