“Volatility has increased dramatically and the trend we are seeing is that clients want to implement a hedged portfolio by using an ETF,” Simon Klein, head of exchange traded product distribution and institutional mandates, Emea and Asia at Deutsche Wealth & Asset Management, told the Financial Times.
Nevertheless, potential investors should also fully understand the strategies and how they work before investing in the products.
“Some do so on the basis of monthly forward contracts, so the hedge does not protect for daily volatility,” Jose Garcia Zarate, an ETF analyst at Morningstar, told the FT.
Additionally, since the currency-hedged strategies implement some form of short currency option, the currency-hedged ETFs may underperform non-hedged ETFs if the underlying currencies strengthen or appreciate against the U.S. dollar.
For more information on the currency hedged strategy, visit our currency hedged ETF category.
Max Chen contributed to this article.