iShares’ currency hedged lineup is gaining a following among institutional investors due in part to the deep liquidity of the underlying iShares ETFs in which the hedged products invest. Earlier this year, HEWG, which invests in the highly liquid iShares MSCI Germany ETF (NYSEArca: EWG), the largest Germany ETF, using currency forward contracts to hedge dollar/euro exposure, was able to absorb a $40 million buy order at a bid/ask spread of three cents when the ETF had just $2.5 million in assets under management. [A Refined Approach to Global ETFs]
“Recent events in the global economy signal an opportunity for currency hedged iShares. Central banks are diverging in monetary policies, with the ECB becoming more accommodative – weakening the Euro – while in the U.S. a looming increase in rates strengthens the dollar. iShares Currency Hedged ETFs offer an efficient and cost-effective solution in a single transaction, so investors don’t have to manage complex currency hedging strategies,” said Daniel Gamba, head of iShares Americas institutional business at BlackRock, in a statement.
Top country weights in the MSCI Emerging Markets 100% USD Hedged Index include almost 19% to China, 16% to South Korea and nearly 12% to Brazil.
ETF Trends editorial team contributed to this post.