WisdomTree Offers Twist on Currency Play: IndexIQ Launches 50% Currency-Hedged Funds

On July 21, WisdomTree added two new ETF firsts, each of which offer investors a unique way to bet on the U.S. dollar.

The Strong Dollar U.S. Equity Fund (USSD ) tracks an index comprised of U.S. companies that derive more than 80% of their revenue from the U.S., essentially allowing investors to avoid U.S. companies that have significant revenue from exports that are vulnerable to a strengthening U.S. dollar.

For those wishing to bet against the dollar, the Weak Dollar U.S. Equity Fund (USWD ) invests in U.S. companies that derive less than 60% of revenue from the U.S. The goal is to maximize exposure to multinational, U.S. export companies that would benefit from a weaker U.S. dollar.

Commenting on the launch, WisdomTree Director of Research Jeremy Schwartz stated “Not all U.S. equities are the same and the degree their operating results are affected by changes in the U.S. dollar largely depends on if their revenues are derived domestically or internationally. USSD and USWD enable investors to focus on the sectors and companies expected to perform better in strong and weak dollar environments, respectively, while maintaining broad diversification.”

Both funds charge 0.33%.

IndexIQ entered the currency-hedged game, launching three new ETF firsts on July 22. The suite tracks FTSE indexes designed to hedge approximately half of its exposure against the U.S. dollar on a monthly basis:

• IQ 50 Percent Hedged FTSE International ETF (HFXI ): This fund invests in equities from the EAFE region, hedging 50% against the U.S. dollar. HFXI charges 0.35%.
• IQ 50 Percent Hedged FTSE Europe ETF (HFXE ): This ETF measures the performance of equities in developed European economies, while hedging half of its currency exposure against the U.S. dollar. HFXE charges 0.45%.
• IQ 50 Percent Hedged FTSE Japan ETF (HFXJ ): This fund invests in Japanese equities, hedging roughly 50% of the exposure to the yen against the U.S. dollar.

IndexIQ CEO Adam Patti commented, “Our research has shown that 50% hedged portfolios have the potential to capture up to 80% of the risk reduction benefits of a fully hedged approach, while potentially securing steadier performance, regardless of exchange rate fluctuations. With the launch of these new funds, investors can now easily add tax-efficient, neutral positioning at the core of their international equity portfolios that is neither actively bullish nor bearish on the direction of the U.S. dollar or foreign currencies.”

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Disclosure: No positions at time of writing.