NEW YORK (TheStreet) -- A few years ago currency ETFs became very popular when Rydex issued a comprehensive suite of individual currency funds. Since then there have been a few other funds to come out but the segment has had less attention paid to it in recent years. That may be changing with a couple of new funds that came out earlier this week.The more interesting of the two stands to be the actively managed PIMCO Foreign Currency Strategy Exchange Traded Fund ( FORX). The primary objective is to offer access to a product that will benefit from a decline in the U.S. dollar. Obviously, if the U.S. dollar generally goes higher then the fund will not do well. Currently the fund has a bias toward developed, commodity-based currencies with 18% allocations to both the Norwegian krone and the Canadian dollar. It is worth noting that the fund can't put more than 20% in any one currency. It also has heavy exposure to the Russian ruble, Mexican peso and Swedish krona. Currently there is no euro exposure and no exposure to the Japanese yen. The actual constituents of the fund will be a combination of currency, currency forward contracts and short-term debt. There is the potential for the fund to have a dividend payout but the short-term interest rates for many of the countries in the fund are very low and any payout would need to overcome the 0.65% expense ratio. As the fund becomes more popular it may be more difficult for the managers to implement their strategy. For example, the fund currently has a 4% weight in the New Zealand dollar. The current size of the fund is $17 million so buying $68,000 worth of NZD is pretty easy to do. If the fund grows to $1 billion and the managers wanted 18% in NZD that would obviously be $180 million which might be difficult because the money supply in New Zealand as measured by M3 is only $4.25 billion so FORX would need to be able to buy an amount equal to more than 4% of New Zealand's M3.
Because FORX is actively managed, fund holders will need to check the holdings regularly to stay informed about any major strategy changes. The other fund is the CurrencyShares Singapore Dollar Trust ( FXSG) which is issued by Guggenheim which bought Rydex in September, 2011. Singapore is considered a stable currency and serves as something of a benchmark in its region. Singapore has several appealing attributes including an unemployment rate below 2% and a current account surplus. There are also some less appealing data points including an inflation rate above 4% and a debt to GDP ratio of 100%. CurrencyShares generally pay dividends based on overnight cash rates of the respective country but interest rates in Singapore are very low. Singaporean two-year sovereign debt only yields 0.27% and the fund has a 0.40% expense ratio. Investing in currencies is different than investing in equities or fixed income. Currencies trade relative to other currencies and the trends can be counterintuitive. Where investors have foreign exposure to stocks and bonds for diversification purposes so too can it make sense to diversify cash in a portfolio into foreign exposure but the learning curve should be steep before considering these funds. At the time of publication, the author held no positions in any of the currencies mentioned. Follow Roger Nusbaum @randomroger This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.