ETF Offers Way To Access Pure European Equity Market Without Additional Currency Risk…
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WisdomTree, an exchange-traded fund sponsor and asset manager, announced the WisdomTree Europe Hedged Equity Fund (HEDJ) recently surpassed $1 billion in assets. HEDJ is designed to provide exposure to European dividend-paying exporters, while hedging out the movements of the euro relative to the U.S. dollar.
Positioning For Future European Central Bank (ECB) Action and Exporters Tied to Global Growth
While the Eurozone’s year-over-year gross domestic product (GDP)1 growth rate turned positive for the first time in two years,2 there are increasing calls for the ECB to take further actions to support the recovery in Europe. Inflation levels in Europe have been trending downwards3 and the ECB may feel compelled to help prevent declining inflation from turning into deflation, or declining price levels.
Targeting Pure European Equities by Hedging Out the Euro
When an unhedged investment is made in foreign securities, the investor is not only taking on the equity exposure but also the currency risk, potentially increasing the overall volatility of the investment.
“Investors who want to participate in Europe’s economic recovery, but are concerned about the fluctuation of the currency should consider the WisdomTree Europe Hedged Equity Fund (HEDJ),” said Jeremy Schwartz, WisdomTree Director of Research. “Currency moves are difficult to predict. Investors should ask themselves: ‘Do I want a secondary currency exposure on top of local equity returns?’ If there is little cost to hedge, as is currently the case in Europe, we believe taking the risk unhedged should be left to investors with full-faith in the direction of the euro.”
1 Gross domestic product (GDP): The sum total of all goods and services produced across an economy.
2 Source: Eurostat, as of 12/31/2013.
3 Source: Eurostat, 03/31/2013-03/31/2014.
Source: ETFWorld – WisdomTree
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