As Volatility Returns, Hedge International Equities with 'HFXI'

Volatility is making an unwelcome comeback as global economies continue to re-open, highlighting the importance of hedged assets like the IQ 50 Percent Hedged FTSE International ETF (HFXI).

“Volatility is back for global stock markets, triggered by uncertainty over central banks’ plans for monetary policy and rising Covid-19 cases around the world,” a CNBC report said.

“The VIX volatility index, a real-time measure of volatility expectations over the next 30 days, inched lower on Monday,” the report added. “Last week, the VIX spiked more than 16% to its highest point since May, as markets digested a surprisingly hawkish turn from the U.S. Federal Reserve.”

The fund seeks investment results that track, before fees and expenses, the price and yield performance of the FTSE Developed ex North America 50% hedged to USD Index. The FTSE Developed ex North America 50% Hedged to USD Index is an equity benchmark of international stocks, with approximately half of its currency exposure of the securities included in the index “hedged” against the U.S. dollar on a monthly basis.

HFXI includes stocks from Europe, Australasia, and the Far East in developed market countries. The fund includes primarily large- and mid-capitalization companies. Overall, the fund boasts:

  1. Passive International Exposure: Employs a truly passive, simpler approach to international equity investing for broad developed market exposure.
  2. Currency Neutrality: A 50% currency hedge mitigates the volatility associated with fully hedged or unhedged strategies, and eliminates the need to make a currency bet.
  3. Potential as a Core International Holding: Use as a low-cost, tax-efficient alternative to actively managed international equity strategies.

HFXI Chart

Volatility to Pick Back Up?

Market analysts are already forecasting that the recent bout of market volatility won’t be the last.

“I think what will most likely happen is that volatility will clearly pick up. Data on the Covid side is clearly very high, and we are seeing a level of discrepancies between the development of the vaccination programs in some of the largest countries and what is going on in emerging markets,” said Matteo Andreetto, head of State Street Global Advisors’ SPDR ETF business in the EMEA region.

“That could potentially cause a difference in terms of speed of the recovery on a global basis.”

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