Approximately 90 new exchange-traded funds have come to market this year, but as is usually the case with rookie ETFs, most are not yet attracting much attention or assets from investors.
Two Top-Performing New ETFs
One of the exceptions, well, one of two exceptions is the WisdomTree Dynamic Currency Hedged International Equity Fund (BATS: DDWM). The WisdomTree Dynamic Currency Hedged International Equity Fund, which debuted on January 7, has nearly $239 million in assets under management. The only ETF born this year with more assets than DDWM is the SPDR Series Trust SPDR SSGA Gender Diversity Index ETF (NYSE: SHE), which has $267.1 million in assets.
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“While three others have managed to accumulate $50 million in assets so far, the rest of this year's launches are still waiting for investors to find them: the remaining 81 launches this year collectively hold $700 million or just as much as these five,” said Lipper Alpha Insight of this year's crop of new ETFs.
Breaking Down DDWM
Bottom line: DDWM has been remarkably successful among this year's new ETFs and even if today was December 31, with nearly $239 million in assets, DDWM would easily be considered a successful new ETF.
Incidental or not, DDWM's timing is proving fortuitous. The U.S. dollar is not crushing rival developed market currencies as it did in 2014 and 2015, but many of the dollar's developed market rivals are nowhere close to recouping the losses of the past two years.
Dynamic Currency Hedging
If a currency, on a purchasing parity basis, is overvalued relative to the dollar, the DDWM can move closer to being fully hedged. Likewise, if the dollar is overvalued compared to other currencies, hedging becomes less useful.
Hence the phrase “dynamic currency hedging.” A simplistic view of DDWM is that it splits the difference of making a strong dollar bet with a currency hedged ETF and a bullish foreign currency bet with an EAFE or Europe ETF.
The WisdomTree Dynamic Currency Hedged International Equity Fund devotes nearly 39 percent of its combined weight to British and Japanese stocks. That new ETF charges 0.35 percent per year, according to issuer data.
Although it is still in its infancy, DDWM is already proving its utility. While the U.S. Dollar Index is down, the British pound is modestly higher and the Japanese yen is on fire, DDWM is highlighting the advantages of dynamic currency hedging with a 6.3 percent gain since inception.
France, Switzerland, Australia and Germany combine for a third of DDWM's geographic weight.
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