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WisdomTree, a US-headquartered provider of exchange-traded funds (ETFs), has launched two new currency-hedged equity funds on the Nasdaq Stock Market: the WisdomTree Japan Hedged SmallCap Equity ETF (DXJS), providing exposure to small capitalisation Japanese stocks, and the WisdomTree United Kingdom Hedged Equity ETF (DXPS), providing exposure to the UK equity market.
Both funds come at critical times for their respective currencies – Japanese yen and Pound sterling – relative to the dollar.
Recent statements by US Federal Reserve Chairman Ben Bernanke appear to signal that the period of ultra-loose monetary policy in the US is coming to an end. At the same time, aggressive monetary stimulus in Japan – colloquially known as ‘Abenomics’ – continues to weaken the yen, while the appointment of Mark Carney at the Bank of England, a man renowned for stern action, could lead to a depreciating pound.
All this means that unhedged US dollar-denominated investors could get hit by adverse currency moves when investing in these markets, as well as experiencing increased volatility. By having an in-built currency hedge, the new WisdomTree funds allow investors to separate and manage these risks effectively.
The new Japan fund is linked to the WisdomTree Japan Hedged SmallCap Equity Index, a currency-hedged index consisting of dividend-paying companies outside of the top 300 largest incorporated in Japan and traded on the Tokyo, Jasdaq or Osaka stock exchanges.
Commenting on the launch, Jeremy Schwartz, WisdomTree Director of Research, said: To expand our coverage of Japanese stocks beyond just the exporters, we have designed DXJS to capture the small-cap portion of the equity markets that we believe are more levered to local Japan consumption and revenue.”
The UK fund is linked to the WisdomTree United Kingdom Hedged Equity Index, a currency-hedged index consisting of dividend-paying companies incorporated in the UK and traded on the London Stock Exchange that derive less than 80% of their revenue from sources in the UK. By excluding companies that derive 80% or more of their revenue from UK, the index is tilted towards companies with a more significant global revenue base.
On this fund, Schwartz said: “We believe DXPS offers investors a unique way to capitalise on the growth potential of leading global companies in the UK while hedging exposure to the British pound. Moreover, we believe the upcoming appointment of Mark Carney as Governor of the Bank of England represents a potential near-term catalyst, with Carney’s reputation as a forward thinking Governor who may enact bold policies to reinvigorate the U.K economy.”
With the launch of DXJS and DXPS, WisdomTree now offers four currency-hedged equity strategies providing developed market exposure.
|Ticker||Fund Name||Expense Ratio|
|DXJ||WisdomTree Japan Hedged Equity ETF||0.48%|
|DXJS||WisdomTree Japan Hedged SmallCap Equity ETF||0.58%|
|HEDJ||WisdomTree Europe Hedged Equity ETF||0.58%|
|DXPS||WisdomTree United Kingdom Hedged Equity ETF||0.48%|