Currency Hedged ETFs Drive Big Q1 Flows

April 01, 2015

Currency-hedged ETFs, led by the WisdomTree Europe Hedged Equity Fund (HEDJ | B-59), drove more than a third of the nearly $59 billion that flowed into ETFs in the first quarter of 2015. The more than $20 billion in flows linked to that currency-hedged ETF topped inflows of $15 billion in the first quarter of 2014.

Total ETF assets ended the quarter at $2.097 trillion, just shy of an all-time record, almost 5 percent higher than at the end of 2014, and more than 20 percent higher than a year ago, according to data compiled by ETF.com. The S&P 500 Index is about flat on the year.

Four of the 10 most popular ETFs in the first quarter were currency-hedged, a reflection of the fact that central bankers in Japan and especially the eurozone are engaged in currency-weakening quantitative easing, while the Federal Reserve in the U.S. is preparing the market for its first rate hike in nine years.

Those currency-hedged strategies and their first-quarter flows are as follows:

The $58.82 billion in total first-quarter inflows puts this year's asset gathering on track to top the $243 billion that flowed into U.S. ETFs in all of 2014. That's likely to be the case because flows into ETFs have historically accelerated as each year unfolds, with fourth-quarter asset gathering the most robust of all.

March flows, in some ways, were quite similar to first-quarter flows in terms of the prevalence of currency-hedged strategies among the most popular funds. HEDJ from WisdomTree and DBEF from Deutsche were the Nos. 1 and 2 ETFs in both March and the entire first quarter.

HEDJ, which won "ETF of the Year" at ETF.com's awards earlier this month, gathered $4.81 billion in March. DBEF, which is a currency-hedged fund based on the MSCI EAFE Index that targets developed-world equities outside of the U.S. and Canada, added $2.42 billion in the month of March. Asset gathering in March totaled more than $28 billion, or nearly half of first-quarter asset gathering.


Flows Q1 2015
Asset Class Net Flows ($,M) AUM ($M) % of AUM
U.S. Equity -11,292.71 1,173,226.28 -0.96%
International Equity 42,494.23 482,167.22 8.81%
U.S. Fixed Income 20,278.02 306,662.91 6.61%
International Fixed Income 1,060.30 24,764.26 4.28%
Commodities 2,787.04 56,949.72 4.89%
Currency 70.89 1,302.50 5.44%
Leveraged 2,242.24 25,421.38 8.82%
Inverse -13.78 17,178.74 -0.08%
Asset Allocation 460.39 5,792.64 7.95%
Alternatives 728.47 3,674.72 19.82%
Total: 58,815.09 2,097,140.37 2.80%




Top Gainers Q1 2015
Ticker Fund Issuer Flows ($M) AUM ($M) Turnover
HEDJ WisdomTree Europe Hedged Equity WisdomTree 10,141.71 17,313.78 22,382.36
DBEF Deutsche X-trackers MSCI EAFE Hedged Equity ETF Deutsche Bank 5,109.65 7,235.47 8,018.95
VTI Vanguard Total Stock Market Vanguard 3,180.65 54,752.31 20,703.77
VOO Vanguard S&P 500 Vanguard 2,971.29 30,637.03 22,959.84
LQD iShares iBoxx $ Investment Grade Corporate Bond BlackRock 2,728.93 22,417.51 19,319.74
DXJ WisdomTree Japan Hedged Equity WisdomTree 2,482.31 15,782.49 18,712.83
HYG iShares iBoxx $ High Yield Corporate Bond BlackRock 2,149.82 16,711.84 39,471.40
IEFA iShares Core MSCI EAFE BlackRock 2,034.02 5,418.03 4,306.25
HEFA iShares Currency Hedged MSCI EAFE BlackRock 1,991.48 2,123.69 2,362.75
USO United States Oil US Commodity Funds 1,763.62 2,792.28 39,175.59

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