My business partner, Aaron Katsman, frequently asks for audacious things. When he fires up “wouldn’t it be nice if…”, you generally brace for an interesting idea. He does a lot of international investing and likes to use ETFs for certain exposure. I found it interesting when he recently mentioned how he’d like to have dollar-based foreign ETFs — but with the dollar exposure hedged out.
Well, come on down, Aaron. IndexUniverse.com is reporting that WisdomTree has filed for currency hedged ETFs. According to the article, “The WisdomTree Currency Hedged DEFA Fund and the WisdomTree Currency Hedged Emerging Markets Fund track indexes that seek to minimize the effects of the changes in the holdings’ local currencies against the dollar”. The funds do this by incorporating one-month forward currency contracts to try to minimize the effects of currency fluctuations.
A lot of the move in foreign markets up until the recent pullback has been fueled by a weaker dollar and it’s interesting to think about how these currency hedged ETFs might be used in a portfolio, particularly for investors looking to tap into foreign markets without the effects of currency movements.
Roger Nusbaum, onse of my favorite sources on investing in general and ETFs in particular, is pretty juiced about the whole development.
