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.
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.