There are options for investors looking to play U.K. stocks benefiting from the weaker pound, including the Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF (NYSEArca: DBUK), iShares Currency Hedged MSCI United Kingdom ETF (NYSEArca: HEWU) and the WisdomTree United Kingdom Hedged Equity Fund (NasdaqGM: DXPS).
DXPS has been a stellar performer this year.
The rally in DXPS “underscores greater demand for currency-hedged U.K. equity-focused assets in the aftermath of the Brexit referendum earlier this year. The gains also brings to mind similar standout performance from the ETF’s currency-hedged Japanese and European cousins at the beginning of 2013 and 2015, respectively, which were accompanied by sizeable inflows at those times,” reports Bloomberg.
In the case of United Kingdom exposure, investors may have found a more “neutral” position with currency-hedged ETFs as the smart-beta strategies have more-or-less reflected the same performance of the underlying U.K. assets, and even the FTSE 100, sans currency risks.
However, potential investors should keep in mind that these currency-hedged ETFs may underperform non-hedged strategies when a foreign currency appreciates against the U.S. dollar, so the investment strategy is not without its risks.
iShares MSCI United Kingdom ETF