The indomitable rise of the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) continues as the exchange traded fund has officially joined the $10 billion in assets under management club.
Buoyed by year-to-date inflows of $4.34 billion as of Feb. 17, by far the best inflows of any ETF, HEDJ is a $10.6 billion ETF, underscoring a growth trajectory that has been nothing short of jaw-dropping. Roughly $9.4 billion of HEDJ’s current assets under management total has come into the ETF since the start of 2014. Last year, investors poured nearly $5.1 billion into the ETF, a number surpassed by just eight other ETFs. [Investors Keep Piling Into Euro Hedged ETF]
“There is uncertainty about the future of the euro and there could be more volatility to come. We believe this makes Europe an attractive place to neutralize currency exposure. A weakening euro may help boost the competitiveness of European exports, an element HEDJ seeks to take advantage of through its exporter tilt,” said WisdomTree Chief Investment Strategist Luciano Siracusano in a statement.
With its asset ascent, HEDJ is now the second-largest currency hedged ETF behind its stablemate, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ). Though overshadowed somewhat by euro hedged ETFs this year, DXJ and rival yen hedged ETFs have continued to capture fresh capital. DXJ is home to $13.2 billion in AUM after adding $1 billion year-to-date. [Good Deals With Japan ETFs]
HEDJ is close to adding another impressive accomplishment: Wresting the title of largest Europe ETF from the Vanguard FTSE Europe ETF (NYSEArca: VGK). The unhedged VGK has lost $781.6 million in assets this year, bringing its AUM total to $11.3 billion at the end of January.
Of the more than 1,400 ETFs (not including ETNs) trading in the U.S., HEDJ is just one of 50 to have $10 billion or more in assets.
The comparison of the two ETFs, although not apples-to-apples, underscores the advantages of currency hedging in a strong dollar/weak euro environment. Over the past year, HEDJ has displayed an almost perfect inverse correlation to the CurrencyShares Euro Currency Trust (NYSEArca: FXE), with the former rising 17.7% as the latter slid 17%. Conversely, VGK, which is not a dedicated Eurozone ETF as HEDJ is, fell nearly 3% over the same 12-month period.
“When thinking about international equity exposure, it’s important to remember there are two components of returns: equity movement, plus the currency movement, relative to the U.S. dollar. So, if an investor does not have strong conviction on a currency’s future performance –the baseline allocation should not be 100% unhedged,” said WisdomTree Research Director Jeremy Schwartz in the statement.
With FXE down 5.7% this year, HEDJ entered Wednesday with a year-to-date gain of 11.5%, more than double VGK’s 2015 returns.
Combining the weak euro and the recently solid economic data out of Germany that helped propel the benchmark DAX to a record high, the near-term outlook for HEDJ and other currency hedged ETFs with significant Germany exposure appears bright. HEDJ allocates almost 26% of its weight to stocks in the Eurozone’s largest economy. [A Rush to Germany ETFs]
WisdomTree Europe Hedged Equity Fund
