HEDJ’s lack of U.K. and Switzerland does not mean increased risk. Germany is the largest country weight at 26.2%, followed by France at almost 23%. Last month, Societe Generale said it expects most European equity markets to be flat by the end of this year, but the bank did say it prefers France and Italy to the U.K., Germany and Switzerland. The bank is forecasting upside for the CAC 40 that is about 10% above current levels. [Embracing the France ETF]
Spain is the largest PIIGS allocation within HEDJ at 17.3%. The Netherlands is HEDJ’s third-largest country weight at 17.4%, not a bad thing when the iShares MSCI Netherlands ETF (NYSEArca: EWN) is up 5% in the past month.
Noteworthy is that the WisdomTree Europe Hedged Equity Index, HEDJ’s underlying index, appeared in July 2012 and neither the index nor the ETF have operated in a period of sustained euro weakness. FXE is up 9% since September 2012, the first full month of HEDJ being accessible in its current form. The ETF has still returned 36% since then while being less volatile than its unhedged rivals.
WisdomTree Europe Hedged Equity Fund
Tom Lydon’s clients own shares of HEDJ.