Spring is on the horizon, and although it may not feel like it across the snowy U.S.A., spring is coming nonetheless, following a much warmer winter than normal over in Europe which has given the continent’s economy plenty of momentum as 2023 hits its stride. For those investors still looking for equities but concerned by overpriced offerings in the U.S., European equities in an ETF like the Franklin FTSE Europe Hedged ETF (FLEH) could be an option.
European equities, long an unpopular area for investors relative to the likes of China or certain domestic U.S. segments, dropped off even further due to energy price worries and geopolitical concerns. That made European equities cheap enough to reignite investor interest, especially given ongoing inflationary and rising rate concerns in the U.S. market. With spring and travel season coming back around again, and China’s reopening having knock-on positives, too, Europe can be a big player for investors.
European equities are continuing to surge on some strong data, but with the U.S. dollar strengthening relative to the Euro, investors may want to find a route into the continent that can mitigate that currency barrier, like FLEH. Currency fluctuations can have a significant impact on gains and losses, a key factor in how FLH invests.
FLEH tracks the FTSE Developed Europe RIC Capped Index and charges a nine basis point fee for its efforts to hedge out currency exposure. As the U.S. dollar strengthens, FLEH can present an important alternative to other Europe-focused strategies that don’t hedge out currency issues, as well, having recently hit its five-year mark as an ETF.
FLEH has outperformed its ETF Database Category Average and its Factset Segment Average over the last month, outperforming the pair of metrics by 374 basis points and 200 basis points, respectively. FLEH has also outperformed the average YTD, returning 9.9% in that time.
Spring brings opportunities, but of course, so too are there challenges for a U.S. economy facing multiple rate hikes this year. For investors who want European equities but without risk from currency issues, FLEH is a strategy to watch in the weeks ahead, with a slew of foreign equities strategies across Europe and Asia, too.
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