VIDEO: ETF of the Week: WisdomTree International Hedged Quality Dividend Growth Fund

Chuck Jaffe: One fund, one point for today. The expert to talk about it. This is the ETF of the Week. Welcome to the ETF of the Week, where we examine trending, new, newsworthy, unique, and intriguing exchange traded funds with the help of Todd Rosenbluth. He’s the Head of Research at VettaFi. And if you go to VettaFi.com, you’ll find all the tools and research that you need to make yourself a better investor in ETFs.

Todd Rosenbluth, it’s great to chat with you again!

Todd Rosenbluth:  It’s great to be with you again, Chuck.

Chuck Jaffe: Your ETF of the Week is…

Todd Rosenbluth: The WisdomTree International Hedged Quality Dividend Growth Fund. IHDG.

Chuck Jaffe: IHDG, the WisdomTree International Hedged Quality Dividend Growth Fund.

There’s a lot there, Todd. I mean okay, so international, hedged, quality, dividend, growth. Five different keywords in one fund name. So is it one of those reasons, two of those reasons, or all five of those reasons why this fund is ETF of the Week?

Todd Rosenbluth:  So, we’ll probably combine a couple of them together. But yes, this is a combo overall of the merits. So this is an international ETF. As one would expect, it invests invest in developed international markets. Europe, Japan, Australia. It does so in a currency hedged way. So that will reduce the volatility of the overall portfolio. Now, some listeners may have a view on the euro.

Some may have a view on the yen. I’m confident most of them do not have a view on Australian currency or Israeli currency. Or I could get Swiss currency, the pound. I could go on and on. So that’s the hedging benefit of it. And then quality dividend and growing, I’m going to probably combine those together. These are dividend paying stocks inside the portfolio.

These are companies that are likely to continue to raise that dividend, but have enough stability from a quality standpoint and a balance sheet to do so. So, really three factors to pay attention to. Do you want international exposure? Do you want a currency hedging across the various countries?  And then, what are the attributes of those companies? And we think a quality dividend growth approach can be a relatively low risk but still rewarding way in this environment.

Chuck Jaffe: Hedged and international particularly important right now? I mean, here we are, in the week where we expect the Federal Reserve to cut rates. The Fed is not the first central bank globally to do that. So, there’s going to be a little bit of currency movement after we see what happens and how foreign central banks respond to a rate cut.

So, is that part of it? And is it also, you know, you got a U.S. market that reached record highs again this week, a little bit of international exposure as a little bit of ballast and balance?

Todd Rosenbluth:  So, let me take the second part first, and hopefully I’ll come back to the first one. So yes, there is a home bias for many U.S. investors and advisor led portfolios. The U.S. has again led from a stock market perspective versus developed international markets. You would have been underexposed if you did nothing within your portfolio. So we think as the Fed is likely to be cutting rates, there’s going to be volatility in the equity markets.

You might want to add and we think you should add some exposure internationally. And this is a good way of doing so. We are also – not only is the Fed meeting this week, we at VettaFi are going to be hosting an Equity Symposium. We’re going to have experts from WisdomTree talking about this on Thursday, the day that this is probably released for folks.

So they can go to ETFTrends.com to learn more about what WisdomTree said. But you’re right. There’s volatility in international markets. Monetary policy is shifting. This is back to your first part of your question. We think hedging can make sense to take that risk off the table. It can be a reward. It can be a risk by hedging, you’re just taking a neutral approach.

Chuck Jaffe: So normally, I don’t have more than one kind of performance oriented question on any ETF we’re talking about. But I definitely have two here today. So this is a fund that has a stellar track record. But its track record shows that when it’s good, it’s very good relative to its peer group. When it’s bad, not so much. Like, this is a fund that it’s had years where it’s in the top 10% of its peer group, but it’s also had years where it’s in the bottom 10% of its peer group.

How much do you just have to say, I’ll accept that volatility in that relative performance and stick with this long term? Or do you want to be in only when the getting’s good?

Todd Rosenbluth: So I think that’s as much of the road to performance and less of volatility. So, this is a smoother ride for investors. So, the fact that it is at the top or the bottom of the relative performance from Morningstar and from others has as much to do with the volatility of investing internationally. And so other funds tend to climb higher or fall faster during during periods of uncertainty.

We think IHDG is a smoother ride for investors that want to reduce that risk of currency. They want to reduce the risk of non-profitable or lower quality companies leading the market higher. These are dividend paying companies. AstraZeneca is one of those companies that comes to mind. These are the blue chip companies of Europe. Sometimes they’re going to be leading the market and sometimes other stocks are going to do better.

Chuck Jaffe: The second performance oriented question. I know you are not a trend follower, but if anybody is looking at the trend, this is a fund that historically, and especially in the more recent past, has had times where it’s above and then below its 200 day moving average. Recently went back above it. Is this the kind of thing because you talked about that smoothness of the ride.

That’s not, when you got a smooth ride. I’m not normally asking, are you maybe a 200 day moving average play. But given that we’re looking at the assets and we want the international, but we know what’s going on, is this maybe a trend following play?

Todd Rosenbluth:  So it sounds like it is. Again, I’m not knowledgeable enough about the trends. I work for a company that has a website, ETFTrends. But I don’t know. If the trend is your friend, you certainly want to ride that out. And this could be a time to be able to get exposure. But be mindful that charts are just one tool, for you to be using.

We think if you look inside the portfolio, you’ll be very happy to see blue chip, high quality, dividend paying companies across the geographies of Europe, Japan, Australia and so forth.

Chuck Jaffe: If someone already has international exposure, is this an attractive add for them? Because it’s got the hedging, etc.? And if you, you know, normally I’m asking if you have it, does it play nice. But in this case if you look at your portfolio and you, you say wait, hold it. I’ve got other international holdings and they are hedged.

Would you add this for the hedging or maybe not add this from a portfolio standpoint, if you previously had put something hedged international in your portfolio.

Todd Rosenbluth: So there’s a good chance, if you’re investing internationally, and you certainly should be investing internationally, you are on an unhedged approach. So the EFA products from iShares, Vanguard’s FTSE based strategies are all unhedged. You might not realize it, but they’re unhedged and you’re taking on currency risk. So the likelihood is you don’t have a currency hedged approach. And then this could be a great compliment to offset some of that currency risk and tilt towards quality.

If you are investing with a currency hedged approach, you might probably be using a WisdomTree product. You have some exposure to the same things. This is probably for people who are not currency hedging at all, or are looking to add their first international equity exposure.

Chuck Jaffe: It’s the IHDG. The WisdomTree International Hedged Quality Dividend Growth ETF. Yeah, it’s a mouthful, but worth checking out. It’s the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff as always. See you again next week!

Todd Rosenbluth:  See you next week, Chuck.

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yeah I am Chuck Jaffe. And I’d love it if you check out my hour long weekday podcast by going to MoneyLifeShow.com, or by searching for it wherever you find great podcasts. Now, if you’re searching for great information on exchange traded funds, look no further than VettaFi.com, where they’ve got all the tools you need to make yourself a better investor.

They’re on X at @Vetta_Fi, and Todd Rosenbluth, their Head of Research and my guest, he’s on X too. He’s at @ToddRosenbluth.

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We’ll be back to introduce you to another great ETF next week. And until then, happy investing everybody!

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