The word “contagion” was used in the popular press over the weekend (i.e. Bloomberg News) when addressing the recent crisis that has affected several Emerging Markets currencies along with the steep weakness in their equity and fixed income markets to begin 2014.
This brings into focus several ETPs that are positioned within the Emerging Markets Currency niche, amid a huge uptick in activity in the marketplace.
CEW (WisdomTree Dreyfus Emerging Currency Fund, Expense Ratio 0.55%) debuted back in 2009 and only averages about 49,000 shares traded on an average daily basis. The fund currently about $164 million in assets under management and has been historically larger than this in past years (net outflows of $138 million in trailing one year period), but as with many niche ETFs, this product has not traditionally been used as a strict buy and hold long term vehicle, but instead as a strategic position to be put on and taken off by institutional managers where and when it makes sense via the path of the basket currencies versus the U.S. Dollar.
CEW traded over 300,000 shares yesterday, dwarfing its average daily volume, and the fund has its largest currency allocations to China (7.11%), India (7.09%), Poland (6.98%), South Korea (6.95%), and Mexico (6.79%).
Most if not all of these countries have been in 2014 headlines in one way, shape, or form as activity has stepped up across the board in everything to do with Emerging Markets lately.
Related ETF from PIMCO, the aptly named FORX (PIMCO Foreign Currency Strategy, Expense Ratio 0.65%) is much smaller than CEW, with only about $20.5 million in assets under management and averaging about 2,500 shares traded daily may also catch some attention in these markets.
The fund is actively managed and ideally benefits from a potential U.S. dollar depreciation against the basket of currencies that is held in the fund. Current positions in FORX are in Norway (15.23%), Brazil (13.94%), Mexico (13.08%), the U.K. (11.70%), and Sweden (8.84%).
Unlike CEW, FORX includes Developed countries as well as Emerging Markets currencies in the underlying index universe.
WisdomTree Emerging Currency Strategy Fund
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