Although advisors and investors have focused intently on the Federal Reserve’s plans for interest rates this year, fixed income exchange traded funds have swelled in size and popularity. In fact, bond ETFs listed around the world now have more than $500 billion in combined assets under management.
Plenty of market participants and pundits have an opinion regarding when the Federal Reserve will raise interest rates. Fortunately, there is some uniformity to those prognostications with “later this year” being the most often bandied about time frame for Fed “lift-off.”
Conventional wisdom dictates that as markets anticipate higher interest rates from the Fed, the U.S. dollar rises.
The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) has obliged,Dollar strength combined with the anticipation of divergent monetary policies throughout the developed world has been a boon for currency hedged ETFs.
The WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF) are top two asset-gathering ETFs this year with combined inflows of over $27.5 billion.
Those inflows could be signaling professional investors’ belief that Fed liftoff is a done deal and is coming soon. Or perhaps that isn’t the case and easy money policies in the ex-U.S. developed world are driving the dollar higher and dollars into currency hedged ETFs. [Big Growth for This Currency Hedged ETF]