A currency hedging strategy could have helped investors generate a higher return than a non-hedged equity position in Japan.
“The MSCI Japan Index, expressed in U.S. dollars, earned annualized returns of 7.53% from March 2013 to March 2014,” Subramnian added. ” If currency exposure were hedged, the index would have returned 17.11%.”
With a Japan hedged-equity ETF, like db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP), which tracks the MSCI Japan US Dollar Hedged Index, investors can gain exposure to the Japanese equities market without the currency risk. DBJP includes monthly currency forwards to hedge against a depreciating Japanese yen. [Rising Inflation Could Bolster Japan ETFs]
The ETF includes heavy exposure to industrials and consumer discretionary sectors that are more export oriented and benefit from a weaker Japanese yen. [Promise of a Pension Infusion Bolstering Japan ETFs]
For more information on Japan, visit our Japan category.
Financial advisors who are interested in learning more about hedging currency risk with Japanese equity exposure can now view the webcast on demand.