Today iShares and WisdomTree are each rolling out lineups of currency-hedged ETFs on the BATS exchange for which the hedges will be adjusted to respond to market conditions.
The three iShares funds, their tickers and expense ratios are as follows:
- iShares Adaptive Currency Hedged MSCI Japan ETF (DEWJ), 0.47%
- iShares Adaptive Currency Hedged MSCI Eurozone ETF (DEZU), 0.50%
- iShares Adaptive Currency Hedged MSCI EAFE ETF (DEFA), 0.35%
On a monthly basis, the iShares ETFs will use what the prospectuses term a "hedge ratio" to determine how much of a currency hedge they will each maintain. The hedge ratio is based on four equally weighted criteria: value, momentum, carry and volatility. A fund can be 0% hedged, 25% hedged, 50% hedged or 100% hedged.
Meanwhile, the four WisdomTree funds, their tickers and expense ratios are as follows:
- WisdomTree Dynamic Currency Hedged Europe Equity Fund (DDEZ), 0.43%
- WisdomTree Dynamic Currency Hedged Japan Equity Fund (DDJP), 0.43%
- WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM), 0.35%
- WisdomTree Dynamic Currency Hedged International SmallCap Equity Fund (DDLS), 0.43%
The WisdomTree ETFs provide a more precise degree of currency hedging than the iShares funds. Although the hedging methodology only relies on three criteria—interest rate differentials, momentum and value—the hedges can range anywhere from 0% to 100%. As with the iShares ETFs, the degree to which each fund is hedged is recalculated on a monthly basis.
Beyond having somewhat different hedging methodologies, the two fund families track different types of indexes. The iShares ETFs are tied to benchmarks weighted by market capitalization, whereas the WisdomTree ETFs’ indexes are weighted by dividends. However, both families of funds have a similar range of expense ratios, with the iShares funds skewing slightly more expensive.
Contact Heather Bell at [email protected].