Guggenheim Investments, the seventh-largest U.S. issuer of exchange traded funds, could become the latest issuer to try its hand at currency hedged ETFs, one of the fastest-growing segments of the ETF universe.
The firm is mulling the introduction of one or more currency hedged ETFs, reports Gertrude Chavez-Dreyfuss for Reuters.
Guggenheim is already the largest provider of currency ETFs in the U.S. through its CurrencyShares unit, which issues well-known ETFs such as the CurrencyShares Swiss Franc Trust (NYSEArca: FXF), CurrencyShares Australian Dollar Trust (NYSEArca: FXA), CurrencyShares Euro Currency Trust (NYSEArca: FXE) and the CurrencyShares Japanese Yen Trust (NYSEArca: FXY).
The currency hedged ETF market has gained assets and grown increasingly competitive over the past two years. Last year, only eight ETFs added more new assets than the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ). In 2013, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) was one of the top 10 asset-gathering ETFs and that trend of currency hedged ETF asset growth is continuing again this year. HEDJ is the top asset-gathering year-to-date while the DeutscheX-trackers MSCI EAFE Hedged Equity Fund (NYSEArca: DBEF) also ranks in the top 10. [Time is Right for Currency Hedged ETFs]
DBEF, HEDJ and the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU) were among the ETFs that at least doubled in size last year. [These ETFs Doubled in Size in 2014]
That is to say that while the currency hedged ETF market could be accepting of new entrants, it is at this point in the U.S. dominated by Deutsche Bank (NYSE: DB) and WisomTree (NasdaqGS: WETF).
“A strong dollar is prompting U.S. investors to buy hedged ETFs. Typically, currency-hedged ETFs protects the underlying international equity exposure against a falling foreign currency such as the euro or yen,” according to Reuters.
Not all currency hedged ETFs have been widely embraced by investors. For example, hedged emerging markets, Germany and U.K. ETFs have not taken off in the same fashion as funds such as DBEU, DBEF and DXJ.
The most recent currency hedged ETF to come to market in the U.S. is the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ), which debuted in December.
ETF Trends editorial team contributed to this post.