Daily ETF Watch: Firm Plans Hedged Funds

April 08, 2015

A recent filing from ProShares outlines the firm’s plans for two international ETFs that apply currency hedging to portfolios of foreign equities. Should the funds launch, it will bring ProShares into an arena already dominated by the likes of WisdomTree, iShares and Deutsche Bank.

 

Currency-hedged ETFs really got kick-started in the last few years, with the success of the WisdomTree Japan Hedged Equity Fund (DXJ | B-69), which benefited from a weakening yen and strong equity performance in Japan.

 

The ETF expanded to more than $15.5 billion in assets under management. WisdomTree had follow-on success with its WisdomTree Europe Hedged Equity Fund (HEDJ | B-58), which blew past DXJ this year to hit more than $17.5 billion in assets.

 

iShares and Deutsche Bank quickly followed, launching their own currency-hedged equity funds. Currently, the count for such funds stands at 30, with a total of $50 billion in assets, more than 60 percent of that invested in DXJ and HEDJ.

 

The ProShares filings outline plans for the ProShares Hedged FTSE Japan ETF and the ProShares Hedged FTSE Europe ETF. All three of the firms in the currency-hedged space have funds covering Europe and Japan, so the funds will enter a crowded field.

 

However, the WisdomTree funds track the firm’s in-house, dividend-weighted indexes, while the Deutsche Bank and iShares funds all track cap-weighted MSCI indexes. The ProShares funds will instead be tied to cap-weighted indexes provided by FTSE, differentiating them a bit from their competitors. Like the other three firms, ProShares will use forward contracts to hedge away the foreign currency risk.

 

The funds are slated to list on the NYSE Arca exchange, but the filings did not mention tickers or expense ratios.

 

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