Trying to capitalize on the growing popularity of the exchange traded fund investment tool, Merk funds is the latest mutual fund provider to turn ETF purveyor as the company crafts an ETF adaptation of its Merk Hard Currency Fund (MERKX).
According to the latest Securities and Exchange Commission filing, the Merk Hard Currency ETF (NYSEArca: MERK) will try to profit from a rise in hard currencies relative to the U.S. dollar.
The ETF will hold “hard currency” denominated investments, which includes high-quality, short-term debt instruments, such as sovereign debt, along with gold and gold-related securities.
Merk defines hard currencies as currencies issued by countries that have “sound” monetary policies, along with gold.
As of June 30, 2014, MERKX hard currency exposure included euro 31.0%, Norwegian krone 4.4%, Swiss franc 0.1%, British pound 18.8%, Swedish krona 4.4%, Australia dollar 12.5%, New Zealand dollar 3.9%, Singapore dollar 3.9%, Japanese yen 9.7%, Canadian dollar 5.9% and gold 15.2%.
Due to the transparent nature of the actively managed ETF wrapper, investors could also gain a glimpse of how the mutual fund operates.
“This fund profits from the appreciation of developed market currencies with sound monetary policies against the U.S. dollar,” according to Morningstar analyst A.J. D’Asaro. “There are two main rationales for owning an inverse dollar fund. First, the U.S. may be unable to grow its way out of its current debt burden without resorting to inflation and dollar debasement, and second, some believe the dollar may also be in danger of losing its special global reserve status, with the euro and Chinese yuan gaining traction as alternatives.”
Investors may also enjoy the lower fees associated with the ETF wrapper. MERK has a 0.79% expense ratio. In comparison, the investor share class MERKX has a 1.30% expense ratio and the institutional share class MHCIX has a 1.05% expense ratio.
It has been a little over two years since Merk first proposed an ETF adaptation of its Hard Currency Fund. [Merk Plans Hard Currency ETF]
For more information on new fund products, visit our new ETFs category.
Max Chen contributed to this article.