Daily ETF Watch: More Currency Hedges

March 24, 2014

iShares is looking to bring to market more currency-hedged ETFs.

iShares is looking to bring to market five new ETFs, including a pair of currency-hedged ETFs, at a time when investor interest in such strategies seems to be cooling.

The proposed new ETFs include the:

Both the iShares Currency Hedged MSCI Emerging Markets ETF and the iShares Currency Hedged MSCI EMU ETF will track their respective MSCI indexes while mitigating exposure to fluctuations between the value of the dollar and sundry emerging markets currencies on the one hand and between the dollar and the euro on the other, according to their filings.

Fund sponsors including iShares can be excused for trying to replicate the Midas touch of the now-$11 billion WisdomTree Japan Hedged Equity ETF (DXJ | B-53). After all, it gathered almost $10 billion in fresh assets last year. But at the end of the day, the Japan story may be the main reason for DXJ’s success.

But it appears investors may now be suffering from a case of currency-hedged overdose, or a lack of education about what those strategies can accomplish. “I think investors are just getting bombarded with currency-hedged ETFs, but there’s very little understanding of exactly what those are,” said Dennis Hudachek, an ETF specialist at ETF.com, in a recent interview.

Dividend, Yield Plays

In addition to the proposed currency hedged offerings, iShares is also looking to make dividend and yield plays spanning domestic and global equities and fixed-income markets at a time when investors are scouring all corners of the ETF landscape for yields.

The Total USD Bond Market ETF, which will track the Barclays U.S. Universal Index composed of U.S.-dollar-denominated bonds that are rated either investment grade or high yield, including U.S. Treasury bonds, government-related bonds and U.S. corporate bonds, among others.

Inflows to bond ETFs have given way to equity ETFs in recent weeks, as investors have developed a “risk-on” mentality in search for riskier assets.

Also, the proposed iShares Dividend Growth ETF will track the Morningstar U.S. Dividend Growth Index, which is composed of U.S. equities with a history of consistently growing dividends, a theme that continues to resonate with investors in a rising interest-rate environment spurred by the Federal Reserve’s tapering of its bond-buying program.

In addition, the iShares Global REIT ETF will track the FTSE EPRA/NAREIT Global REIT Index, which is composed of publicly listed real estate investment trusts in developed as well as emerging markets.

Related tickers and fees were not available for the proposed funds.

Filings

  • ETFis has filed regulatory paperwork to launch a pair of active alternative equity and bond ETFs, dubbed the AltShares Long/Short U.S. Equity Fund (LGSH) and the AltShares Long/Short High Yield Bond Fund (LSHY).

LGSH will invest in a portfolio of 20-50 stocks that have strong or improving fundamentals or are likely to underperform the market, according to its regulatory filing. LSHY will bet on a portfolio of high-yield debt securities spanning short-term, medium-term or long-term maturities.

The fund’s unnamed subadvisor will analyze debt securities included in the Bloomberg High Yield Index to assess the relative strength of trend, which determines buy and sell signals in the high-yield fixed-income market, according to its filing.

Related fees were not available for the proposed funds.

The Market Vectors uranium and energy index is a modified capitalization-weighted, float-adjusted index that seeks to track the performance of the global uranium and nuclear energy segment.

Its methodology focuses on investability, diversification and pure-play exposure to the relative asset class.

No changes will be made to the fund name, symbol or CUSIP number.

 

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