iShares, the exchange-traded fund (ETF) business of BlackRock, (NYSE: BLK), launched three currency hedged ETFs designed to reduce the impact of currency fluctuations on returns when investing in foreign countries. The iShares Currency Hedged MSCI EAFE ETF (NYSEArca; HEFA), iShares Currency Hedged MSCI Germany ETF (NYSEArca: HEWG) and iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) expand iShares broad international line-up that includes the multi-billion dollar, unhedged iShares MSCI EAFE (NYSEArca: EFA), Germany (NYSEArca: EWG) and Japan (NYSEArca: EWJ) ETFs.
Foreign investments often include the added risk of fluctuating exchange rates, which can impact overall returns. The three new iShares ETFs allow investors to access, in a single trade, international exposures while reducing the risk of currency fluctuations. By investing in their related unhedged, parent iShares ETFs (EFA, EWG and EWJ) and implementing foreign currency forward contracts, iShares Currency Hedged ETFs provide an easy and cost-effective way to mitigate unwanted currency risk.
The new funds track indexes by MSCI, the premier international index provider that employs a market-cap weighted methodology and provides comprehensive local country exposure with diversified sector weightings. The funds will also benefit from the deep liquidity of the parent iShares ETFs, which are expected to provide the iShares Currency Hedged ETFs with ample secondary market liquidity and the ability to efficiently create and redeem shares.
The funds are managed by BlackRock’s Index Asset Allocation Team, which has over 50 years of combined experience and manages over $35 billion in currency-related assets. iShares has also managed currency hedged ETFs for over a decade, offering approximately 30 different funds internationally.Daniel Gamba, Head of iShares Americas Institutional Business at BlackRock, commented: “Today’s volatile global currency rates are causing investors with international portfolios to pay closer attention to how they can manage currency fluctuations. iShares Currency Hedged ETFs offer an efficient and cost-effective solution in a single transaction, so investors don’t have to manage complex currency hedging strategies. Investors with positive views on Japanese, German or EAFE equities, but negative views on local currencies relative to the U.S. dollar would be interested in these ETF funds.”