State Street Global Advisors expanded its line of currency hedged exchange traded funds with two new products that capture high-yield international companies.
On Tuesday, SSgA launched the SPDR MSCI International Real Estate Currency Hedged ETF (NYSEArca: HREX) and the SPDR S&P International Dividend Currency Hedged ETF (NYSEArca: HDWX), according to a press release. Both new ETFs come with a 0.48% expense ratio.
“Recent flow trends have highlighted continued investor interest in currency hedged ETFs to help manage currency volatility,” James Ross, executive vice president and global head of SPDR Exchange Traded Funds at State Street Global Advisors, said in the press release.
According to ETFGI, global currency-hedged ETFs have seen assets surge 83% to $118.3 billion in the year ended July, with WisdomTree attracting the lion’s share of assets at $41.6 billion, compared to $26.0 billion for iShares and $22.5 billion for Deutsche’s db x-trackers. [Currency War Concerns & The Rise of Currency-Hedged ETFs]
Currency-hedged ETF growth is predominately coming out of the U.S. where assets have jumped 174% in the year ended July from $26.9 billion at the end of last year.
HREX and HDWX will cover international stocks with exceptional dividends. Specifically, HDWX, which acts as the hedged version of the SPDR S&P International Dividend ETF (NYSEArca: DWX), follows a dividend-weighted index of the 100 highest yielding non-U.S. stocks – DWX shows a 5.64% 12-month yield.
Additionally, HREX will focus on non-U.S. companies from developed markets that have generated 75% or more of their revenue from real-estate-related businesses. State Street, though, does not offer a non-hedged ETF version of HREX.
“The search for yield continues to be a pressing need for investors and the addition of HREX and HDWX provides our clients with the ability to better manage currency risk when seeking attractive income-producing opportunities outside of the US,” Ross added.
These types of yield-generating investments may pick up as global investors search out income opportunities after foreign central banks enacted loose monetary policies, similar to what happened in the U.S. markets after the Federal Reserve cut rates.
The new ETFs will utilize foreign currency forward contracts to hedge currency risks. Consequently, these currency hedged ETFs could outperform non-hedged funds if foreign currencies weaken against the U.S. dollar. However, potential investors should be aware that the currency hedged ETFs could underperform non-hedged funds if foreign currencies strengthen or the U.S. dollar depreciates.
The fund provider only has one other currency-hedged product, the SPDR EURO STOXX 50 Currency Hedged ETF (NYSEArca: HFEZ), which acts as the hedged version of the SPDR EURO STOXX 50 (NYSEArca: FEZ). [State Street Gets Into the Currency Hedged ETF Game]
For more information on new fund products, visit our new ETFs category.
Money managers who are looking into constructing their own ETFs may also be interested in attending the second annual ETF Boot Camp in New York later this month. Whether you’re an ETF start-up, fund company, broker dealer, pension plan, endowment, private equity firm, fund board independent director, 401k plan provider or ETF industry executive…this conference is designed for you. This one-of-a-kind event will condense everything you need to know about the inner workings of the ETF business into two days.
Max Chen contributed to this article.