Meet The Award Winning Japan ETF From WisdomTree

The WisdomTree Japan Hedged Equity Fund DXJ took home the coveted ETF of The Year Award from ETF.com last week in an awards ceremony that honored the best sponsors and ETFs in the industry. 

This honor was based on the fund’s innovative solution to combining equity and currency related holdings in a transparent investment vehicle.

DXJ employs an investment approach designed to track the performance of the WisdomTree Japan Hedged Equity Index.  The fund provides exposure to equity securities in Japan, while at the same time hedging exposure to fluctuations between the value of the U.S. dollar and the Japanese yen.  The fund currently holds a basked of over 300 individual companies paired with currency futures contracts and charges an annual expense ratio of 0.48 percent.   

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This unique mix added significant value to shareholders last year versus a traditional equity-only fund such as the iShares MSCI Japan ETF EWJ.  In 2013, DXJ gained 41.86 percent compared to 26.48 percent for EWJ.  In addition, DXJ raked in an impressive $9.7 billion in new assets last year which was second only to the SPDR S&P 500 ETF SPY in total net asset flows. 

The devaluation of the Japanese yen as a result of aggressive quantitative easing measures by the country’s central bank provided a measurable boost to the total return of DXJ last year.  The CurrenyShares Japanese Yen Trust FXY, which tracks the daily price movement of the yen, fell 17.93 percent in 2013 which helped spur foreign investment in Japanese equities.

Based on the breakout success of DXJ, Wisdomtree has launched an entire suite of five additional currency-hedged funds.  The most widely adopted sibling of DXJ so far is the Wisdomtree Europe Hedged Equity Fund HEDJ which has already gained nearly $1 billion in total assets. 

Clearly U.S. investors are hungry for unique strategies that allow them to invest in foreign markets with the added benefit of minimizing currency fluctuations. 

It will be interesting to see how DXJ and other similar funds react under adverse circumstances, such as a rising yen, when compared to more traditional country ETFs.  Right now the environment remains favorable for continued growth in this international arena.