ETF Chart of the Day: Euro Bears

July 23rd at 12:25pm by Paul Weisbruch, Street One Financial

The Euro has not behaved well recently for those whom are long the currency, as we have observed FXE (CurrencyShares Euro Trust, Expense Ratio 0.40%) trade at its lowest levels since the January/February timeframe of this year.

Year to date, the fund has lost a significant portion of assets, with more than $70 million leaving the fund via redemptions and making this ETF only a $186 million product at this point. What is surprising to us is that this ETF is only the seventh largest currency ETP listed in the U.S. marketplace in general currently in terms of assets under management, behind products that track things such as the Swiss Franc, Canadian Dollar, and Australian Dollar for example.

It should be noted however, and this is a point that we brought up a few months back when we checked in with the Euro and related ETPs, that the second largest Currency ETP out there currently is EUO (ProShares UltraShort Euro, Expense Ratio 0.95%, $450 million in AUM), which of course is a “Euro Bear” strategy.

EUO has not had notable asset flows year to date either, attracting only about $16 million year to date in spite of the fact that the fund is trading at or near 2014 highs. Given that EUO is leveraged, it is understandable that
some may prefer to use the ETF in short term directional trades or as hedges only, but it seems to us that at a good portion of the AUM invested in EUO is “sticky,” due to the absence of observable fund flows at least recently.

A fund that was launched in mid-2012, EUFX (ProShares Short Euro, Expense Ratio 0.95%) has not attracted the attention that we believed it would after its initial launch, as the fund only has about $14 million in AUM currently and averages an underwhelming 3,400 shares traded daily. EUFX may be more attractive to those portfolio managers whom are bearish the Euro for either trading or hedging reasons but do not want to incorporate leverage into the trade.

With the Euro toiling once again, perhaps EUFX may hit more screens and get in front of managers whom may have missed it the first time around. On the flipside, it is surprising to see a levered long product, ULE (ProShares Ultra Euro, Expense Ratio 0.95%) see so little action (about 1,000 shares traded daily and the fund only has about $2.5 million in AUM), especially given the prolonged weakness in the Euro currency this year.

One would think that at least one contrarian or two looking to bottom fish the currency may give the fund a look at some point as a potential trade. Market Vectors is also an entrant to this space, with the somewhat recognizable DRR (Market Vectors Double Short Euro ETN, Expense Ratio 0.65%) which has about $36 million in AUM, and the much smaller URR (Market Vectors Double Short Euro ETN, Expense Ratio 0.65%) which by comparison actually has less than $1 million in AUM. ERO (iPath EUR/USD Exchange Rate ETN, Expense Ratio 0.40%) is also an offering in the space, with this fund having about $3 million invested currently.

CurrencyShares Euro Currency Trust

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For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

Street One Financial is an educational/research firm utilizing the Broker Dealer services of Precision Securities, a FINRA registered Broker/Dealer.

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