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WisdomTree launches Europe Hedged SmallCap Equity Fund


WisdomTree has launched the WisdomTree Europe Hedged SmallCap Equity Fund (EUSC) on the NYSE Arca providing exposure to small capitalisation stocks within European equity markets while hedging exposure to the euro. 

The new fund has a net expense ratio of 0.58%.

In Europe – as in other global equity markets – small companies tend to offer big potential, providing access to the local economic prospects. Mario Draghi followed up his promises to do "whatever it takes" and the European Central Bank (ECB) announced a new round of aggressive stimulus that is encouraging momentum and positive economic sentiment for European assets.

Jeremy Schwartz, WisdomTree Director of Research, says: "When you have inflection points – such as the ECB's decisive action to undertake quantitative easing (QE) by purchasing government bonds and expand the balance sheet – this may be supportive for equities and designated 'risk' assets. And typically, small caps are often tied to local economic prospects, more so than globally oriented large caps and therefore, more responsive to shifts in local economic cycles. Small caps could be a favoured asset class if the ECB QE program successfully reignites inflation and growth in Europe."

The euro continues to be a source of uncertainty. For investors looking to isolate local European equity exposure by removing the euro as a source of risk, the WisdomTree Europe Hedged Equity Fund (HEDJ) has become an important exposure with approximately USD12 billion in assets under management.

Schwartz says: "To expand our coverage of European stocks beyond the large capitalisation, exporter focus of HEDJ, we have designed EUSC to capture the small cap portion of the equity markets that we believe are more levered to local European growth and revenue."

"When considering the divergence between the US central bank – which is looking to tighten monetary policy, and the ECB – which undertook more aggressive stimulus, it is reasonable to expect the euro to remain challenged relative to the US dollar. As a result, we believe that currency exposure may negatively impact US investors' international equity returns," Schwartz adds.

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