IndexIQ, a unit of MainStay Investments, introduced its three 50-percent currency hedged ETFs about two years ago and the trio have proven quietly successful. On a combined basis, the three ETFs have $460 million in assets under management.
New York-based Index IQ is cutting the fees on three ETFs in dramatic fashion as each of the 50-percent currency hedged funds is seeing its annual expense ratio reduced by 16 basis points.
Inside The Fee Cuts
The IQ 50 Percent Hedged FTSE Europe ETF HFXI has a new annual fee of 0.2 percent, or $20 on a $10,000 investment, down from 0.36 percent.
“Unlike currency indexes available today which hedge 100 percent of the US dollar currency exposure of the underlying securities, this new suite of indexes from FTSE Russell hedges against 50 percent of the fluctuations between the US dollar and the home currency of the underlying index constituents,” according to FTSE Russell, the index provider for HFXI and the other IQ currency hedged products.
The IQ 50 Percent Hedged FTSE Europe ETF HFXE and the IQ 50 Percent Hedged FTSE Japan ETF HFXJ each have new expense ratios of 0.3 percent per year, down from 0.46 percent.
HFXI features exposure to 22 countries while 15 countries are featured in HFXE.
Performance
The performance of the 50 percent currency hedged ETFs has been impressive. Over the past year, HFXI has outpaced the MSCI EAFE Index by almost 65 basis points. HFXE is higher by 15.3 percent over the past 12 months.
“HFXI and the other funds in this product suite have performed exactly as designed since we launched them in July of 2015, even as Brexit, the results of the U.S. election, and a push for a weaker dollar have whipsawed the currency market in different and frequently counterintuitive ways,” according to IndexIQ.
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