When it comes to fixed income exchange traded funds, U.S. investors often focus on domestic bond funds, but there are yield-boosting and diversification opportunities with international bond funds, such as the X-trackers Barclays International Corporate Bond Hedged ETF (CBOE: IFIX).
IFIX, which hit a six-month high Friday, follows the Barclays Global Aggregate Corporate Ex USD Bond Index (USD Hedged).
Fixed-income investors may look to international markets to diversify their bond exchange traded fund portfolios, but people should be aware of the negative effects of foreign exchange fluctuations and keep in mind potential strategies to diminish the currency risks.
When investing in overseas markets, investors should consider the negative effects of currency risks on their investments as forex fluctuations have contributed to volatility. Investors, though, can manage the currency risks with a currency-hedged strategy, which is particularly of import with the U.S. dollar strengthening against foreign currencies.
Benefits Of IFIX ETF
IFIX provides targeted market exposure to investment-grade global debt through an easy-to-use investment vehicle. Furthermore, investors will be able to diversify their portfolios and strengthen returns while minimizing volatility and losses to potentially generate improved risk-adjusted returns, along with offsetting exposure to fluctuations between the U.S. dollar and select foreign currencies.
The ETF, which holds 111 bonds, allocates 65.8% of its weight to European debt and 25.9% to bonds from North American issuers. At the end of last year, 41 countries and 14 currencies were represented in IFIX.