ETF Trends publisher Tom Lydon discussed the iShares Currency Hedged MSCI EAFE ETF (HEFA) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
As investors look to international market opportunities, take a moment to consider currency risks. Investor are looking into global markets because of the ongoing global expansion, improving corporate earnings.
However, when investing in overseas markets, investors will be exposed to foreign exchange currency fluctuations, or currency risks.
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While exchange rates return to equilibrium value over time, currencies don’t indefinitely appreciate or depreciate but rather go through cycles.
Currency hedged ETFs have underperformed non-hedged counterpart as the USD weakened.
HEFA pretty much acts like the currency hedged version of the popular iShares MSCI EAFE ETF (EFA). It covers developed countries in Europe, Australasia and the Far East.
HEFA includes a 100% component exposure to EFA. Additionally, HEFA includes currency forward contracts on the Euro currency, Japanese yen, Swiss franc, Australian dollar, British pound sterling, and Swedish krona.