Thanks to Abenomics, WisdomTree is enjoying tremendous
success with its
Japan Hedged Equity Fund
) this year. The product returned an impressive 36% in the
year-to-date time frame. The success goaded the issuer to launch
quite a few products this year.
WISDMTR-J HEF (DXJ): ETF Research Reports
PWRSH-DB US$ BU (UUP): ETF Research Reports
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This month WisdomTree is back with its latest launch of
The WisdomTree Bloomberg U.S. Dollar Bullish
(USDU) which seeks to provide exposure to the U.S. dollar against
a broad basket of developed and emerging market currencies.
The timing of this launch seems to be perfect, given that Fed
will eventually begin its taper program in early 2014. (see
4 Best New ETFs of 2013
USDU in Focus
The new ETF, launched on December 18, tracks the performance of
the Bloomberg Dollar Total Return Index. The fund follows an
active management strategy and seeks to deliver better returns
than the index, although before fees and expenses.
The index aims to benefit fromx any appreciation in the U.S.
dollar relative to a basket of 10 developed and emerging market
currencies, charging investors 50 basis points annually. These
currencies have the highest liquidity and also the largest U.S.
The fund has the highest exposure to the Euro zone currency
(34.32%), followed by the Japanese yen (16.13%), Canadian dollars
(11.94%) and pound (10%) each with double-digit exposure. The
fund has the least exposure in China (3.01%) and Singapore
(2.10%) currencies. In a nutshell, the fund has half of its
exposure in Europe, the Middle East & African currencies.
Japan ETFs: One Year After Abenomics
To ride the appreciation of the greenback against the basket of
these currencies, the fund invests in very short-term investment
grade government and corporate debt securities. However, unlike
money market funds, the fund is not intended to keep its share
How does it fit in a portfolio?
The fund could be a solid choice for investors who expect the
greenback to rise against this assorted basket of currencies.
After months of speculation, the Fed has finally decided to start
tapering its $85 billion a month bond buying program by $10
billion from January onwards. (Read:
Fed Tapers Bond Purchases: 3 ETFs in Focus on the
Market experts believe that though the Fed will keep interest
rates near zero until the unemployment rate falls below 6.5%, the
eventual decision to start tapering is encouraging. The decision
strongly reflects Fed's view that the economy is slowly
recovering and is on a growth trajectory.
Positive economic data on employment, manufacturing, housing,
consumer spending, and GDP growth speaks of a reviving economy.
The economy has created 193,000 jobs in the past three months and
the unemployment rate has declined gradually. The rate is
currently at a five-year low of 7%.
Thus investors can consider adding this fund to their portfolio
to ride the pullback in the greenback.
The fund has gathered $32.6 billion worth assets and added 0.64%
The recent product currently has a solitary competitor in
US Dollar Index Bullish Fund
), which also seeks to build a bullish position on the dollar.
UUP is the leader in the currency space and might make it a
little difficult for WisdomTree to capture its share. The fund
manages a huge asset base of $684 million and charges the same
annual fees as USDU.
The Fed's decision has finally revived hopes for the U.S. dollar.
Investors who had unwinded their long positions in the dollar
after a No Taper from the Fed can consider adding long positions
now. The dollar is expected to rise going into the New Year
against major currencies.
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