ETF Trends
ETF Trends

Our piece on the “Volatility Hedged Equity” category and specific focus on VIXH (First Trust CBOE S&P 500 VIX Tail Hedge, Expense Ratio 0.60%) generated a good amount of questions and interest, and today has us talking about the development of Currency hedged products in the “Hedged Equity” category which has progressed quite rapidly in terms of product offerings and collective assets under management via such products in a relatively short amount of time.

DXJ (WisdomTree Japan Hedged Equity, Expense Ratio 0.48%) of course is a household name at this point, but this was not always the case for this fund prior to its strong performance run that began in late 2012 through early 2013, accompanied with a massive influx of institutional interest and asset flows bringing the fund to its current level of about $9.8 billion in AUM.

Other fast growing products here that were designed to provide equity exposure but with neutral exposure to that region or country’s currency include HEDJ (WisdomTree Europe Hedged Equity, Expense Ratio 0.58%), and this particular product has now raised more than $2.1 billion while averaging more than 524,000 shares traded daily. Most of this interest and asset raising took place throughout 2013 and 2014, with scant interest up until that point, even noting the fund’s inception date of late December of 2009.

DBJP (dbX MSCI Japan Currency-Hedged Equity, Expense Ratio 0.45%) has also represented this space well in the recent past, pulling in more than $531 million in AUM since its 2011 inception and seeing steady growth in regular trading volume.

There is clearly a growing amount of investor and institutional interest in Equity structured index products that nullify that country or region’s exposure to their own currency, and understandably so given the volatility that we have witnessed in major currencies even as of late (one can take a look at the charts for FXY, FXE, UUP, and so on to get a flavor for what we are referring to).

DBEU (dbX MSCI Europe Hedged Equity, Expense Ratio 0.45%) debuted in October of last year and has reeled in more than $208 million already for example, and we see more than twenty other funds listed in this space covering not only Japan and Europe but also Germany (HEWG, DBGR), Emerging Markets (DBEM), the U.K. (DXPS), South Korea (DXKW), and even Brazil (DBBR) just to name a few approaches.

WisdomTree Japan Hedged Equity Fund

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.