Exchange traded funds provider Invesco PowerShares Capital Management has launched the PowerShares Europe Currency Hedged Low Volatility Portfolio (FXEU), which has listed on the NYSE Arca.
Based on the S&P Eurozone Low Volatility USD Hedged Index, FXEU aims to provide investors with European equity exposure while helping to mitigate unexpected equity market developments and potential currency risk.
"European stocks have seen significant volatility over the last ten years and there is a clear need for risk management solutions," says Dan Draper, Managing Director and Head of Invesco PowerShares. "International investing is often accompanied by the risks of uncertain stock selection and foreign exchange fluctuations. While the Eurozone economy presents an important opportunity to global investors, changing economic, geopolitical and market dynamics have led many to re-think currency and volatility risk. Further enhancing our suite of low volatility solutions, FXEU allows participation in the European equity market's potential upside while aiming to protect portfolios from potential market downturns."
FXEU is based on a simple and transparent index methodology. The 80 stocks with the lowest realized volatility over the past year are selected from the S&P Eurozone BMI Index to form the S&P Eurozone Low Volatility USD Hedged Index. Constituents are weighted by the inverse of their volatility so that the stocks with the lowest volatility receive the greatest weights. To further improve the risk mitigation of this low volatility strategy, the portfolio is then 100 percent currency hedged to the US dollar using rolling one-month forward contracts that are adjusted monthly.