It has been established that investors like dividend exchange traded funds and it has been affirmed this year that there is plenty of affinity for currency hedged funds. After all, four of the top 10 asset-gathering ETFs on a year-to-date basis are currency hedged products.
The two concepts have been previously married in single ETFs and WisdomTree (NasdaqGS: WETF) adds to the group of currency hedged dividend funds today with the debuts of the WisdomTree International Hedged SmallCap Dividend Fund (NYSEArca: HDLS) and the WisdomTree Global ex-U.S. Hedged Dividend Fund (NYSEArca: DXUS).
The methodology that serves as the backstop for the WisdomTree International SmallCap Dividend Fund (NYSEArca: DLS), a $1.1 billion ETF that debuted in 2006, is used by HDLS. DLS tracks the WisdomTree International SmallCap Dividend Index, a fundamentally-weighted benchmark that weighs components based on annual cash dividends paid.
“For those thinking about small-cap equities, HDLS offers the same stock selection and rebalancing methodology of our Index that is tracked by DLS with a hedge that mitigates the currency risk inherent in international investing,” said WisdomTree Research Director Jeremy Schwartz in a statement.
HDLS follows the WisdomTree International Hedged SmallCap Dividend Index, the currency hedged version of DLS’ benchmark. That index currently yields 3.37% and allocates almost 27.4% of its weight to mid-cap stocks. The new ETF allocates about 61% of its weight to Japan, the U.K. and Australia. By comparison, the MSCI EAFE Index allocates less than half its weight to those countries.
Industrial, consumer discretionary and financial services stocks combine for nearly 62% of HDLS. Single-stock risk is non-existent in the new ETF as its largest holding, China Power International, is just 1.16% of the fund’s weight. HDLS charges 0.58% per year. [Global Small-Cap ETFs for Income]
DXUS, the WisdomTree Global ex-U.S. Hedged Dividend Fund, follows the WisdomTree Global ex-U.S. Hedged Dividend Index. That index combines developed and emerging markets and is “dividend weighted with country weights equal to the float-adjusted market capitalization weight of the universe of the selected top 1000 stocks,” according to WisdomTree.
The index has a dividend yield of 3.52%. Although DXUS features emerging markets exposure, China is the new ETF’s largest emerging markets weight at 2.6%. Japan, the U.K. and Switzerland are the fund’s largest country weights, combining for over 42%. DXUS’ largest holding is the iShares MSCI Taiwan ETF (NYSEArca: EWT).
DXUS and HDLS are not WisdomTree’s first forays into currency hedged dividend ETFs. The WisdomTree International Hedged Dividend Growth Fund (NYSEArca: IHDG) is just 13 months old and already has nearly $362 million in assets under management. [A Combo ETF Right for the Times]
In April, the issuer launched the WisdomTree Japan Hedged Dividend Growth Fund (NYSEArca: JHDG). The debuts of DXUS and HDLS bring WisdomTree’s currency hedged ETF stable to 14 members.
DXUS Sector Weights
Table Courtesy: WisdomTree