Tag Archives: currency ETF

ETF Investors Look For Success Outside The US

April 7, 2015 MarketsMuse Staff Reporter Leave a comment

MarketsMuse blog update is courtesy of CNBC’s Jeff Cox. As we have seen so far this year, ETFs have been becoming increasingly popular among all investors. MarketsMuse blog update profiles the biggest trends in ETF investing, including investing in international currencies. An excerpt from CNBC’s Jeff Cox’s article, “Hottest ETFs are currency hedges, non-US funds” is below.

Exchange-traded funds have surged in popularity in 2015, but it’s not U.S. equities that are leading the charge.

Investors poured $97.2 billion into various ETFs and other similar products in the first quarter, marking the $2.9 trillion industry’s biggest start ever despite a wobbly U.S. stock market and a testy geopolitical climate, according to data from BlackRock, the world’s largest provider of such funds. (U.S.-based ETFs have about $2.1 trillion in assets.)

There essentially have been three major investment themes this year, and players in the exchange-traded market have made each work: A quest for investment themes outside the U.S.; the offshoot of that, which has seen domestic attention turn away from large caps and toward mid- and small-sized companies, and capitalizing on the big moves in currency markets, particularly an appreciation of the U.S. dollar and the decline of its global competitors. The greenback has gained 7 percent so far against a trade-weighted basket of other leading currencies.

Some $59 billion has found its way into products that focus on currency hedging, according to ETF.com, which said the group represented four or the top 10 funds for investor flows during the first three months of the year.

To read the rest of the article on ETF investment trends from CNBC, click here.

ETF News

Hedged Vs. Unhedged International Currency ETFs

March 18, 2015 MarketsMuse Staff Reporter Leave a comment

MarketMuse blog update courtesy of CNBC. With investing overseas being so dangerous right now, because of enormous moves in currency, buying stocks overseas—including ETFs, why are people so keen on doing it. CNBC reporter, Bob Pisani’s ask the question:

Why doesn’t everyone buy hedged international ETFs when they want international exposure, rather than unhedged ETFs?

There are several reasons:

1) Until recently, it was almost impossible for the average investor to do so. There simply were no ETFs that enabled an investor to hedge out currency. A professional could hedge, of course, but at considerable cost.

Now that more hedged ETF products are becoming available, investors are taking note. In fact, the biggest European ETF is now a hedged product, the WisdomTree International Hedged, which recently surpassed its biggest unhedged rival, the Vanguard European ETF.

2) There was not a huge demand for such a product because currency moves like we have seen in euro this year (down 5 percent against the dollar) are very rare. Oh sure, maybe if you were investing in Argentina, but not the euro, not the yen. Most years did not involve anywhere near such dramatic moves.

This year, for example, the yen has barely moved against the dollar, so the difference between a hedged Japan ETF and an unhedged Japan ETF is very small:

That was not the case last year, when there was an enormous move in the yen versus the dollar, and investors made the DXJ the hottest ETF in years.

For the entire article from CNBC’s Bob Pisani’s story “Why currency-hedged ETFs are hot”, click here.

ETF News, Global Macro Strategy

Guggenheim Investments Eyes Currency Hedged ETFs

February 2, 2015 MarketsMuse Staff Reporter Leave a comment

MarketMuse update is courtesy of Reuters.

Guggenheim Investments, the seventh-largest ETF issuer in the United States, is considering trying on currency hedged ETFs for size.

Guggenheim Investments is considering launching one or more currency hedged exchange-traded funds, one of the hottest and most sought-after financial products the last few months.

“I will confirm that we’re interested in this space,” Bill Belden, Guggenheim’s managing director of product development in Chicago told Reuters on Friday. “We’re very familiar with the currency space and we’re always interested in providing new products whether they’re hedged or not.”

A currency-hedged ETF removes the foreign currency return of a given fund by buying a forward contract in the currency, and rolling it typically on a monthly basis.

Currency-hedged ETF assets grew 48 percent in 2014 to roughly $20.8 billion, and have grown 1,519 percent over the past two years, according to Deutsche Bank AG, a major player in the space.

In contrast, unhedged European equity ETFs have seen six straight months of outflows since June 2014, with an aggregate $8.9 billion in outflows, Deutsche Bank data shows. On the other hand, hedged European equity ETFs have seen consistent inflows over the same period, taking in $4.5 billion.

A strong dollar is prompting U.S. investors to buy hedged ETFs. Typically, currency-hedged ETFs protects the underlying international equity exposure against a falling foreign currency such as the euro or yen.

BlackRock Inc, WisdomTree Investments Inc and Deutsche Bank are the three major players in the currency-hedged ETF space. WisdomTree, which was the first to this ETF sector, is the largest of the three, with about 80 percent of the roughly $20 billion allocated to currency-hedged ETFs.

WisdomTree in January alone attracted $1.6 billion in inflows, according to Luciano Siracusano, WisdomTree’s chief investment strategist.

But Guggenheim’s Belden said there’s room for more players in the industry. Guggenheim has about $28.8 billion in ETF assets and roughly $220 billion overall.

“The hedged ETF you have seen basically captures an exposure to an international market that hedges against a local currency’s falling value,” said Belden.

“But we know that local currencies don’t fall perpetually. It has been a pretty consistent trend in the past but we don’t know what’s going to happen to those strategies, if any particular currency goes the other way.”

Guggenheim has a suite of nine currency ETFs, totaling about $1.1 billion. Of the nine ETFs, two have shown positive returns. CurrencyShares Japanese Yen Trust is up 1.5 percent so far this month, and the CurrencyShares Swiss Franc Trust is up 8 percent.

ETF News

HARD is On:Currency-Centric ETF

July 10, 2012 MarketsMuse Staff Reporter Leave a comment

by Cinthia Murphy

United States Commodity Funds, the firm behind the $1.25 billion U.S. Oil Fund (NYSEArca: USO), filed paperwork with U.S. regulators to market its first currency fund, this one a futures-based currency ETF that would serve up exposure to a basket of five currencies at a time.

The U.S. Golden Currency Fund (NYSEArca: HARD) is a commodity pool comprised of futures contracts that represent equally weighted interest in five hard currencies that are widely used, easily exchangeable and issued by an economically strong country, the company said. The portfolio, which is rebalanced monthly, will have an estimated annual fee of 0.85 percent, including 0.60 percent in management fees.

The base currency for the strategy is the U.S. dollar, and therefore the dollar is not eligible to be one of the five currencies in the mix, the prospectus said.

Instead, the fund will select its exposure annually from the 25 most actively traded global currencies as measured every three years by the Bank of International Settlement currency trading report, the filing said. The latest BIS list, which was published in 2010, had the U.S. dollar, the euro, the Japanese yen, the British pound, the Australian dollar and the Swiss franc at the top. Continue reading →