WisdomTree, an exchange-traded fund sponsor and asset manager, has launched the WisdomTree Japan Hedged SmallCap Equity Fund (DXJS) and the United Kingdom (UK) Hedged Equity Fund (DXPS) on the Nasdaq Stock Market.
DXJS is designed to provide exposure to small capitalisation stocks within Japanese equity markets while hedging exposure to the yen. DXPS is designed to provide exposure to UK equity markets while hedging exposure to the British pound.
Following US Federal Reserve Chairman Ben Bernanke’s June 19 statements on potential Fed tapering purchases of US bonds, interest rates rose and the US dollar strengthened on expectations of an improving US economy. Bernanke seems to have signalled the period of extraordinary monetary accommodation in the US is coming to an end.
A rising US economy should prove supportive for global markets, but may create headwinds for foreign currencies relative to the dollar. WisdomTree believes investors should consider how volatility in foreign exchange rates may impact their international investments. With today’s launch, WisdomTree now offers currency hedged strategies for three of the world’s most important currencies: the euro, yen and pound.
Thus far in 2013, the depreciating Japanese yen has been a boon to the country’s large exporters, a trend the WisdomTree Japan Hedged Equity Fund (DXJ) is designed to target. More broadly, the three-pronged strategy of fiscal stimulus, monetary stimulus and structural reforms commonly referred to as "Abenomics" is intended to spur economic growth within Japan and strengthen the Japanese consumer base.
"To expand our coverage of Japanese stocks beyond just the exporters, we have designed DXJS to capture the small cap portion of the equity markets that we believe are more levered to local Japan consumption and revenue," said Jeremy Schwartz, WisdomTree director of research.
The UK is the third largest market in the MSCI AC World Index following the US and Japan, representing another global market where investors may consider equity exposure without taking on local currency risk.
Schwartz says: "We believe DXPS offers investors a unique way to capitalize on the growth potential of leading global companies in the UK while hedging exposure to the British pound. Moreover, we believe the upcoming appointment of Mark Carney as Governor of the Bank of England (BOE) represents a potential near-term catalyst, with Carney’s reputation as a forward thinking Governor who may enact bold policies to reinvigorate the UK economy."