Daily ETF Watch: Korea Fund’s Big Inflows

March 13, 2015

The last few years have seen certain currency-hedged ETFs draw a lot of assets. First it was the WisdomTree Japan Hedged Equity ETF (DXJ | B-57), then it was the WisdomTree Europe Hedged Equity ETF (HEDJ | B-51). Both funds grew in popularity as the currencies of the markets they tracked fell; they now have assets under management above $14 billion apiece.

 

It looks like it might be Korea’s turn—with a Deutsche Bank twist. South Korea recently cut borrowing rates, which put downward pressure on the Korean won. Yesterday, the Deutsche X-trackers MSCI South Korea Hedged Equity ETF (DBKO | F-54) saw $51 million in inflows, nearly doubling its assets under management to $115 million.

 

A competing fund, the WisdomTree Korea Hedged Equity ETF (DXKW | F-42), meanwhile seems largely unaffected. Its assets remain under $20 million. Unlike HEDJ and DXJ, WisdomTree’s DXKW relies on an earnings-weighted methodology rather than one that is weighted based on dividends; that could have been the determining factor for investors who were perhaps less comfortable with the approach.

 

However, HEDJ, DXJ and DXKW have an additional twist to their methodology—all three target export-oriented companies, which tend to do well when their home currency weakens. Perhaps investors see that added feature as less relevant for South Korea.

 

Either way, the surge in assets could set DBKO to be the next market darling should the won continue to suffer.

 

Direxion Filing

Direxion Shares, the second-biggest purveyor of leveraged and inverse ETFs, plans to expand its lineup of triple-exposure funds with the addition of four ETFs—one bull-and-bear pair focused on biotech stocks, and another pair targeting shares of companies in the oil and gas equipment and services sector.

 

The four ETFs, each of which comes with an annual expense ratio of 95 basis points, or $95 for each $10,000 invested, are as follows:

 

  • Direxion Daily S&P Biotech Bull 3X Shares and Direxion Daily S&P Biotech Bear 3X Shares target a fast-moving industry that some think might be in the midst of a bubble. The funds will track the same index as the largest biotech fund, the SPDR S&P Biotech ETF (XBI | A-60).
  • Direxion Daily S&P Oil Services Bull 3X Shares and the Direxion Daily S&P Oil Services Bear 3X Shares will cover a similarly hotly debated industry that has been dragged down by low oil prices. They share the same index as the SPDR S&P Oil & Gas Equipment & Services (XES | A).  

 

The Direxion funds will allow investors with more tactical views to easily express them—the two “bull” funds offer 300 percent of their underlying index’s daily performance, while the “bear” funds offer the inverse of that (-300 percent). Such products are only appropriate for more sophisticated investors and traders, as their returns can deviate significantly over time from those of their indexes.  

 

Tickers weren’t included for the funds, each of which will have its primary listing on NYSE Arca.

 

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