Another example of ETFs providing liquidity to institutional investors comes by way of a new developed markets offering: The iShares Currency Hedged MSCI Germany ETF (NYSEArca: HEWG).
HEWG debuted in February and Laffer Investments, which manages $732 million, was mulling a stake in HEWG while the ETF was still small.
“The challenge was that among the various precision instruments to orchestrate a Germany hedged position, Laffer considered HEWG but the size of the new ETF launched in February 2014, was small at approximately $2.5 million. Laffer was contemplating an allocation of $40 million, which would represent 1020% of the fund’s average daily dollar volume and 1580% of the fund’s total AUM,” according to iShares.
HEWG invests in the highly liquid iShares MSCI Germany ETF (NYSEArca: EWG), the largest Germany ETF, using currency forward contracts to hedge dollar/euro exposure. EWG’s liquidity helped Laffer execute a sizable order in HEWG at a bid/ask spread of just three cents without upsetting the underlying market for the new hedged ETF.
HEWG now has nearly $58 million in assets under management and has jumped nearly 6% in the past month, getting a lift from the European Central Bank’s recent decision to lower interest rates. [Conservative Europe ETFs]
iShares MSCI Frontier 100 ETF