Ebbing volatility in currency markets is slowing inflows to currency hedged exchange traded funds, which have been this year’s most prolific asset gatherers.
“U.S. hedged ETFs attracted $204 million in the week through June 19, the least since December, data compiled by Bloomberg show. The funds have been among the most popular ones among investors, attracting $39.8 billion this year,” reports Rachel Evans for Bloomberg.
Those inflows are not too shabby when considering the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the price movement of the U.S. dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, is off nearly 1% over the past week. UUP is up 3.2% and the stronger dollar has been a major reason investors have flocked to currency hedged ETFs looking to exploit greenback strength against major developed market currencies such as the euro and yen. [Don’t Bet on Prolonged Dollar Weakness]
Led by the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF), four of this year’s top 10 asset-gathering ETFs are currency hedged funds. The other two are the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) and the iShares Currency Hedged MSCI EAFE ETF (NYSEArca: HEFA). [Momentum for Currency Hedged ETFs]
HEDJ has pulled in almost $13.9 billion in assets this year, more than any other ETF, while DXJ has seen 2015 inflows of $4.2 billion. That is good for the sixth-best total among all ETFs. As of June 19, DXJ and HEDJ and $18.1 billion and $19.9 billion in assets under management, respectively.
DBEF, a currency hedged play on the popular MSCI EAFE Index, has also been a prolific asset gatherer. As of June 19, the ETF was home to $12.5 billion in assets under management, up from $800 million in mid-October.