iShares launches currency hedged ETFs
iShares has launched three currency hedged exchange-traded funds designed to reduce the impact of currency fluctuations on returns when investing in foreign countries.
The iShares Currency Hedged MSCI EAFE ETF (HEFA), iShares Currency Hedged MSCI Germany ETF (HEWG) and iShares Currency Hedged MSCI Japan ETF (HEWJ) expand iShares broad international line-up that includes the multi-billion dollar, unhedged iShares MSCI EAFE (EFA), Germany (EWG) and Japan (EWJ) ETFs.
Foreign investments often include the added risk of fluctuating exchange rates, which can impact overall returns. The three new iShares ETFs allow investors to access, in a single trade, international exposures while reducing the risk of currency fluctuations. By investing in their related unhedged, parent iShares ETFs (EFA, EWG and EWJ) and implementing foreign currency forward contracts, iShares Currency Hedged ETFs provide an easy and cost-effective way to mitigate unwanted currency risk.
The new funds track indeics by MSCI, the international index provider that employs a market-cap weighted methodology and provides local country exposure with diversified sector weightings. The funds will also benefit from the liquidity of the parent iShares ETFs, which are expected to provide the iShares Currency Hedged ETFs with ample secondary market liquidity and the ability to efficiently create and redeem shares.
The funds are managed by BlackRock‘s index asset allocation team.
Daniel Gamba, head of iShares Americas institutional business at BlackRock, says: "Today’s volatile global currency rates are causing investors with international portfolios to pay closer attention to how they can manage currency fluctuations. iShares Currency Hedged ETFs offer an efficient and cost-effective solution in a single transaction, so investors don’t have to manage complex currency hedging strategies. Investors with positive views on Japanese, German or EAFE equities, but negative views on local currencies relative to the US dollar would be interested in these ETF funds."
Diana Tidd, managing director and head of the MSCI index business in the Americas, says: "With the growth of global investing, the impact of currency movements can be a significant issue. Investors are exposed to currency risk when investing abroad and adverse moves in exchange rates can impact their performance. Hedging currency exposure is one technique for taking currency risk out of the equation.
"For investors using our widely followed market capitalisation indexes such as MSCI EAFE and MSCI Japan, the corresponding MSCI Currency Hedged Indexes enable them to directly analyse and measure the performance of a hedged equity index without the impact of currency but keeping the same underlying country and sector exposures. We are pleased that iShares is once again expanding their ETF suite based on MSCI indexes."
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