One of the most successful ETF issuers in 2015 is adding three exchange traded funds to its offerings.
In 2009 WisdomTree was at the forefront of a now ubiquitous movement to nullify the effect currency fluctuations were having on investor returns. Currency-hedged ETFs have multiplied since due to the ability to capture necessary diversification without exposure to volatile currencies.
The approach has developed a strong headwind in emerging markets. ETF Trends chatted with WisdomTree’s Associate Director of Research, Christopher Gannatti, to discuss details, “High interest rates have implemented a 4-5% cost on any currency-hedged ETF that tracks emerging markets. With the volatility these investments have seen this year that cost is seen as too high by WisdomTree so they’ve developed an approach that looks to capture dollar strength rather than offset currency fluctuations.”
Christopher went on to discuss the strategies used to implement these goals. The keys are to steer away from sectors like materials, energy, financials, and telecom which are too heavily affected by the strengthening greenback. In addition to avoiding commodities priced in USD a lot of emerging market corporations that work in these sectors are too exposed to debt that is issued in dollars and further weighs on returns.
The WisdomeTree Strong Dollar Emerging Markets Equity Fund (NYSEarca: EMSD) looks to capture results from emerging market companies that get more than 15% of their revenues from the U.S. in order to leverage the appreciating dollar. Another tact they’ve taken to accomplish this is to maximize exposure to companies with large revenues from exports that benefit from a strengthening U.S. dollar.
The expense ratio of the ETF is 0.58% and opens at an NAV of $24.89. The top sector exposure breakdown is IT 35.79%, Consumer Discretionary 24.42%, and Industrials at 17.73%.
The second ETF released hones in on a global allocation WisdomTree is high on.
“We believe in a European recovery and the policies Mario Draghi of the ECB is implementing and are going on the offensive with our allocations to capture the growth” Mr. Gannatti said of The WisdomTree Europe Local Recovery Fund (NYSEarca: EZR). The new ETF seeks to track European companies that are sensitive to growth prospects in the eurozone and derive more than 50% of their revenue from Europe and focuses on companies that may benefit from the economic recovery and the increase in Europeans’ buying power.
To accomplish this the fund looks to limit exposure in defensive positions like consumer staples and telecom while gaining exposure to cyclical sectors that reflect highly on the ECB Sentiment Indicator. Financials, Industrials, and Consumer Discretionary make up over 75% of the ETF’s positions. The expense ratio is 0.48%.
Last but not least the WisdomTree Global ex-U.S. Hedged Real Estate Fund (NYSEarca: HDRW) looks to apply a more traditional currency-hedged approach to dividend-paying companies in the real estate sector.
Mr. Gannatti pointed out that over two-thirds of the global real estate investment opportunities lie outside of the U.S. and this ETF looks to capture the best of them. The fund comes to market with 0.43% expense ratio.