Are Currency Hedged ETFs Overheated?

The big trade of 2015 has undoubtedly been the movement towards currency-hedged ETFs as a way to participate in the upside of international markets, while eliminating the underlying currency risks. These ground breaking funds accomplish this by owning a basket of international stocks with simultaneous exposure to short positions in the host country’s currency.

The WisdomTree Europe Hedged Equity ETF (HEDJ) has taken in over $9 billion in new assets since the beginning of the year. In fact, HEDJ has now surpassed the WisdomTree Japan Hedged Equity ETF (DXJ) as the largest currency hedged ETF with $16.5 billion in total assets under management.

Second on the list of top ETF inflows this year is the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (DBEF), which has taken in $4.2 billion. DBEF tracks the broad-based EAFE index as a representation of Europe, Australia, and the Far East – essentially a big picture representation of developed and emerging market holdings.

The Vanguard Europe ETF (VGK) has gained just 7.06% this year and lagged behind HEDJ by approximately 28% over the last 52-weeks.

Continue reading this article here.