As the strengthening U.S. dollar currency threatens the value of global equity positions for U.S. investors, currency-hedged exchange traded funds have become a popular way for people to gain foreign exposure and easily hedge currency risk.
On the upcoming webcast, Benchmarks Matter When Hedging Currency, Sebastien Galy, Director of Foreign-Exchange Strategy at Deutsche Bank, Mark Eicker, Chief Investment Officer at Sterling Global Strategies, Anil Rao, V.P. of Index Applied Research at MSCI Inc., and Sean Edkins, Director and ETF RVP for Deutsche Asset & Wealth Management, help explain how the currency-hedging strategy works and the alternative indexing methodology behind the increasingly popular smart-beta ETF plays.
If a foreign currency depreciates, or the U.S. dollar appreciates, foreign currency-denominated equities will have a lower USD-denominated return. Consequently, a number of currency-hedged ETFs have accumulated large inflows as investors diversify away from U.S. markets but seek a way to mitigate currency risks associated with international equities. [ The Rise of Currency-Hedged ETFs]
For instance, the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF) is the second most popular currency-hedged ETF option this year, attracting over $13.0 billion in net inflows year-to-date.