While many investors understand the impact of currencies on their portfolios, they may not fully understand how to allocate to dedicated currency strategies as part of the asset allocation process. In WisdomTree’s approach to the asset class, our currency strategy Funds are structurally no different from our equity or fixed income Funds. A dollar bullish strategy is created through the combination of short-term Treasury bills or repurchase agreements and forward currency contracts that sell foreign currencies against the U.S. dollar. With the short-term fixed income positions serving as collateral, investors gain exposure to currency markets on a one-to-one notional basis. For investors concerned about currency risk, strategies such as the WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) could prove beneficial.
1Sources: Bloomberg, Citigroup, WisdomTree, as of 11/30/14.
Important Risks Related to this Article
Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Derivative investments can be volatile, and these investments may be less liquid than other securities, and more sensitive to the effects of varied economic conditions. While the Fund attempts to limit credit and counterparty exposure, the value of an investment in the Fund may change quickly and without warning in response to issuer or counterparty defaults and changes in the credit ratings of the Fund’s portfolio investments.