As the taper begins to ravage international markets, investors
in the ETF world are starting to see the impact of currencies on
foreign holdings. Many currencies are slumping against the U.S.
dollar, and this is really having a huge negative impact on stock
prices when investors adjust returns back to American currency.
Thanks to this currency slide and the possibility of a strong
dollar, investors are starting to embrace currency-hedged ETFs in
droves. Several have proven their worth over the past few months
and they have really begun to build up assets as a result, leading
other ETF issuers to consider jumping in on the market as well (see
the Top Ranked ETFs here
This trend has recently hit iShares, the world's biggest provider
of ETFs, prompting the firm to put out its first three currency
hedged ETFs on the market. Below, we highlight these new funds from
iShares in this currency-hedged market, and their main competitors
for assets in this increasingly fierce space for investors who are
looking to get in on this growing trend as well:
iShares Currency Hedged MSCI EAFE ETF: HEFA
For a broad foreign market play without the currency risks,
investors could consider HEFA which focuses on the EAFE
region-Europe, Australasia, Far East-for exposure. This product
follows the MSCI EAFE 100% Hedged to USD index, holding just over
900 securities in its basket and charging a pretty low 39 basis
points a year in fees.
The product is basically a holding of
with a currency hedged tacked on, giving it a focus on financials,
industrials, and consumer stocks. Top nations include the UK,
Japan, and Switzerland, while France and Germany round out the top
five for this well-diversified fund (see
all the Broad Developed World ETFs here
EAFE Hedged ETF Competition:
While there are a few European hedged ETFs on the market, there is
really only one direct competitor at this time, the
db X-trackers MSCI EAFE Currency Hedged Equity Fund (
. This product is pretty popular too, as it has over $300 million
in AUM, and a solid volume level as well, suggesting it will be a
tough foe for HEFA.
iShares Currency Hedged MSCI Germany ETF: HEWG
This fund gives investors exposure to the German market without
worrying about the influence of the euro's fluctuations. The
product charges investors 53 basis points a year in fees and it
tracks the MSCI Germany 100% Hedged to USD Index.
This ETF is a play on iShares' ultra-popular
with a hedge to strip out the euro currency exposure. As such, the
fund holds about 60 securities in its basket with a focus on
consumer discretionary, financials, and basic materials (see
7 ETFs to Buy in 2014
Germany Hedged ETF Competition:
There are currently two products in this space,
. While neither has developed a huge following the db X-trackers
MSCI Germany Hedged Equity Fund (DBGR) currently has the lead in
the space with about $40 million in AUM.
iShares Currency Hedged MSCI Japan ETF: HEWJ
This ETF looks to match the local currency performance of stocks in
Japan, allowing investors to take the yen out of Japan investing.
The product charges investors 48 basis points a year in fees and it
follows the MSCI Japan 100% Hedged to USD net TR Index.
The ETF is basically an investment in
but with a currency hedge, holding over 300 stocks in its basket.
Exposure is tilted towards consumer, industrial, and financial
Toyota Motor (
takes the top spot at just over 6% of assets.
Japan Hedged ETF Competition:
The Japan hedged ETF market and it is currently dominated by
, though the lion's share of the assets goes towards WisdomTree's
DXJ. This fund has close to $12 billion in assets under management,
and it is actually approaching EWJ as the most popular
Japan-focused ETF on the market (See
2 Japan Hedged ETFs for 2014
The currency-hedged ETF competition is really heating up and it is
hard to say how many more funds the space can take for now. This is
especially true considering that some markets, such as Japan, have
already seen huge moves in their currency, while others, like
Germany, haven't really ever seen a big currency loss (at least in
Given this, it is hard to say how these new funds will compete,
particularly considering the entrenched competition in some of the
key markets. Still, it is iShares, and they tend to compete very
well in every market so I wouldn't count out these funds and the
iShares machine just yet.
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Author is long EWG
DB-XT MS EA HDG (DBEF): ETF Research Reports
DB-XT MS GER HD (DBGR): ETF Research Reports
WISDMTR-J HEF (DXJ): ETF Research Reports
ISHARS-EAFE (EFA): ETF Research Reports
ISHARS-GERMANY (EWG): ETF Research Reports
ISHARS-JAPAN (EWJ): ETF Research Reports
ISHA-CH MS EAFE (HEFA): ETF Research Reports
ISHA-CH MS GERM (HEWG): ETF Research Reports
ISHA-CH MS JAP (HEWJ): ETF Research Reports
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