Hedged Europe ETF performance not so hot

  • Investors have rushed $13B into WisdomTree's (NASDAQ:WETF) Europe Hedged Equity ETF (NYSEARCA:HEDJ) this year, bringing AUM to $20B, and making it 2015's most popular ETF, the largest Europe ETF out there, and the largest currency-hedged ETF, according to Ned Davis Research.
  • The fund is also ahead 30% YTD - not too shabby. However, says NDR, all of the gains have come from the euro's depreciation. A strategy of buying the MSCI EMU Index (BATS:EZU) and shorting the euro would have returned 70% over the same period. In other words - amid a nice bull move in Europe - HEDJ's strategy of owning exporters, which should theoretically gain as the euro slides, hasn't worked (the fund must own mega-cap stocks deriving more than 50% of revenue from outside Europe).
  • What gives? First, Europe's exporters have been hit by exposure to struggling LatAm countries. Second, the companies in the HEDJ already hedge currency exposure, booking it as an expense. Finally, the valuation of stocks in HEDJ trade at a 52% premium to  a broad MSCI eurozone index.
  • Source: Barron's
  • Previously: WisdomTree stumbles as GMO questions value of currency-hedged ETFs (April 14)
  • Previously: WisdomTree hedged small-cap Europe ETF opens for business (March 4)
  • ETFs: VGK, FEZ, HEDJ, IEV, EPV, EZU, FEU, EURL, FEP, UPV, DBEU, ADRU, HEZU, FEEU, IEUR, FIEU, DBEZ, FEUZ, SBEU

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