Call it currency hedging 2.0. When it has come to international exchange traded funds, investors have had two options: Being completely unhedged or being 100% hedged with popular ETFs such as the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF).
IndexIQ, the ETF issuer known for its lineup of unique alternative and hedge fund replication funds, changed that today with the introduction of three ETFs that are 50% currency hedged. Those new ETFs are the IQ 50 Percent Hedged FTSE International ETF (NYSEArca: HFXI), IQ 50 Percent Hedged FTSE Europe ETF (NYSEArca: HFXE) and IQ 50 Percent Hedged FTSE Japan ETF (NYS Arca: HFXJ). Each of those ETFs track FTSE Russell indexes.
“Unlike currency indexes available today which hedge 100% of the US dollar currency exposure of the underlying securities, this new suite of indexes from FTSE Russell hedges against 50% of the fluctuations between the US dollar and the home currency of the underlying index constituents,” according to FTSE Russell. http://www.ftse.com/products/home
The IQ 50 Percent Hedged FTSE International ETF tracks the FTSE Developed ex North America 50% Hedged to USD Index, which is made up primarily of large- and mid-cap companies in Europe, Australasia and the Far East. Top equity holdings in HFXI include Nestle (OTCBB: NSRGY), Novartis (NYSE: NVS) and Toyota (NYSE: TM).
HFXI devotes nearly 43% of its combined weight to Japan and the U.K. with France, Switzerland and Germany combining for over a quarter of the new ETF’s weight. Top sector allocations include 25.3% to financial services, 18.5% to consumer goods and 14.2% to industrials, according to issuer data.