Daily ETF Watch: iShares Debuts Hedged Japan Fund

October 01, 2015

Today iShares rolled out a hedged version of its iShares JPX-Nikkei 400 ETF (JPXN) for the same price as JPXN. The iShares Currency Hedged JPX-Nikkei 400 ETF (HJPX) will invest mainly in JPXN and apply a currency hedge via foreign currency forward contracts.

The underlying benchmark of JPXN and HJPX is a smart-beta index that takes into account everything from corporate governance standards to return on equity—very different from the plain-vanilla, cap-weighted iShares MSCI Japan ETF (EWJ | B-99).

All three funds have an expense ratio of 0.48 percent.

Gold Council Plans Fund

A recent filing from the World Gold Council outlines the organization's plans to launch a fund that will track the performance of the price of gold against a basket of non-U.S. currencies. The Global Currency Gold Trust will be listed on the NYSE Arca exchange and trade under the ticker "GGLD."

The WGC comprises 18 member firms, all of them global gold mining companies, and describes itself as a "market development organization for the gold industry." It was the driving force behind the SPDR Gold Trust (GLD | A-100), and the sponsor for both GLD and GGLD is WGC USA Asset Management Company LLC.

GGLD's underlying benchmark, the Thomson Reuters Global Gold (ex-USD) Index, represents a long position in gold and a short position in a portfolio of non-U.S. currencies, according to the prospectus.

Essentially, when the price of gold increases and the U.S. dollar's value increases against the value of the basket of currencies, the index will rise. It will fall when the price of gold falls and the value of the U.S. dollar versus the basket of currencies also declines. The idea is that the investor will see returns similar to what they would have achieved if they bought physical gold with the non-U.S. currencies represented in the index.

However, there's no guarantee that the U.S. dollar and the price of gold will always trend in the same direction, nor that the entire basket of currencies will always trend in the same direction relative to each other. As the prospectus notes, "[t]he net impact of these changes determines the value of the Fund on a daily basis."

As of April 20, the basket of currencies to which the index offered short exposure included the euro, the yen, the pound, the Australian dollar, the Swiss franc, the Canadian dollar and the New Zealand dollar, with the first three currencies in the list receiving the heaviest weights. Together, the euro, yen and pound represented 77 percent of the index.

The prospectus notes that the index covers the currencies falling into the top 90 percent of FX turnover and previously has included the Swedish krona, the Hong Kong dollar and the Norwegian krone.

The filing did not include an expense ratio or fees.


Contact Heather Bell at [email protected].

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