New ETFs On The Block: iShares Currency Hedged And REIT ETFs (HEZU, REET)

Ulli International ETFs Contact

156288184BlackRock’s iShares, the world’s largest issuer of exchange traded funds, added two more funds to its tally recently to expand its lineup on investment themes that found favor with investors this year.

While the iShares Currency Hedged MSCI EMU ETF (HEZU) is a European equity-play that has a currency-hedge streak, the iShares Global REIT ETF (REET) is a global real-estate equity play with exposure in developed and emerging markets.

Following the Fed’s taper announcement last year, many currencies across the world witnessed heightened volatility on the back of heavy dollar outflow from international markets. The slide stoked demand for products that offered protection against currency fluctuations, bringing currency-hedged funds under the spotlight.

HEZU tracks the MSCI EMU 100% USD Hedged Index and aims to match the local currency performance of stocks from developed market countries within the European Monetary Union (EMU). The fund is well-diversified and holds about 250 securities in its portfolio. Sector-wise, financials top the chart with 23 percent allocation, followed by industrials and consumer discretionary. Top nations include Germany, France, Spain, Austria, Finland and the Netherlands.

HEZU should find favor with investors willing to bet on Europe’s recovery, particularly after the slew of measures announced by the European Central Bank. As the ECB prepares to embark on asset purchases in order to boost household and business lending in the currency region, large- and mid-cap European companies are likely to take-off to cater to the region’s pent-up demand, benefitting the fund. A weaker euro will add to HEZU’s benefits further. The fund has an annual expense ratio of 0.51 percent.

The other fund REET should attract investors looking to boost income before yields start to rise next year. REET tracks the FTSE EPRA /NAREIT Global REIT Index and is likely provide high dividend payouts as REIT products generally carry high dividend yields. Legally, REIT products are required to distribute at least 90 percent of their taxable annual income as dividends to shareholders.

REET can also act as a hedge against inflation while providing robust capital appreciation over the long term to investors looking to reinvest dividends. The fund’s portfolio consists of 239 stocks with Simon Property Group, Unibail-Rodamco and Public Storage occupying the top three spots. Though a global play, REET is tilted toward the US with 61 percent of total fund allocation, followed by single-digit exposures to Australia, Japan and the UK.

REET charges 14 basis points in fees, putting it near the lower end of the REIT ETF fee spectrum.

Disclosure: No holdings

Contact Ulli

Leave a Reply