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Since the importance of currency hedging international investing is known to all, thanks to the soaring greenback against a basket of currencies, WisdomTree could not hold itself back from rolling out a currency-hedged global small-cap ETF, a few days after launching the WisdomTree Global SmallCap Dividend ETF (BATS: GSD ). The newly launched fund is named WisdomTree Global Hedged SmallCap Dividend Fund and trades under the ticker symbol HGSD . In any case, WisdomTree is almost at the helm of the currency-hedged ETF investing style. And this strategy would be extremely meaningful next year, as the Fed looks to hike key rates by the end of this year and most developed nations (even some emerging markets) are following the easy money policy to boost their economies (read: ” Can Anyone Match WisdomTree in Currency-Hedged ETFs? “). Below, we highlight the key characteristics and the prospects of HGSD. HGSD in Focus HGSD looks to deliver the investment results of the 1,000 largest small-capitalization companies that fall in the bottom 5% of the WisdomTree Global Dividend Index. It simultaneously follows a currency-hedging exposure, which is a beneficial strategy to minimize the adverse fluctuations between the U.S. dollar and foreign currencies. The fund charges 43 bps in fees. Sector-wise, Financials dominates the fund with 26.43% allocation, closely followed by Industrials (20.1%), Consumer Discretionary (15.34%) and Materials (9.21%). Geographically, the U.S. takes about 49.24% of the total basket, with Japan taking the second spot, holding about 10.69%. The other regions account for single-digit holdings each. How Could it Fit in a Portfolio? The wave of easy money polices across the globe, be it in Europe or Asia, have brightened the appeal for dividend investing lately. Though the Fed is preparing for policy normalization in December, the modest U.S. growth momentum indicates a slower rate hike trajectory in the future. All these market forces should keep bond yields in check globally. As a result, investors looking for steady current income might shift their focus to high-dividend stocks. Moreover, all these market forces set the stage for global investing, but it in a currency-hedged manner to neutralize the dollar strength. The newly launched ETF’s heavy exposure in the U.S. and Japan will enable it to ride on steady economic growth. Though the Japanese economy has slipped into a recession, its central bank is pursuing an ultra-easy monetary policy which should act as a driver for investors. Other underlying nations, including the UK, Canada and Australia, have also chosen the accommodative policy route to boost their own economies. This will lead to stepped-up activities and rising business and consumer confidence, which, in turn, will benefit small-cap companies. After all, small caps are considered the measure of the domestic economy. In a growing economy, these pint-sized securities perform the best, as they generate most of their revenues from the domestic market and strip out global growth concerns. Competition Players in the global small-cap, currency-hedged ETFs are not many. Hardly two or three products are available now. So, HGSD will face stiff competition from the iShares Currency Hedged MSCI EAFE Small-Cap ETF (NYSEARCA: HSCZ ) and the WisdomTree International Hedged SmallCap Dividend ETF (NYSEARCA: HDLS ). However, WisdomTree’s other fund, HDLS, does not consider stocks outside the U.S. and Canada. So, HGSD should not face any hurdle in amassing investors’ assets. Original Post Scalper1 News
Scalper1 News