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Betashares launches 2 new currency-hedged ETFs

Posted: 23 July 2020 12:06 pm
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The ETFs are the hedged versions of Betashares' popular flagship global equity ETFs.

Two new global exchange traded funds (ETFs) that track major US technology companies listed on the NASDAQ have launched this week in Australia.

The ETFs HETH and HNDQ from Betashares are currency-hedged versions of the popular NASDAQ 100 ETF (NDQ) and Global Sustainability Leaders ETF (ETHI).

ETHI is the largest ethical ETF in Australia, with $650 million in assets while NDQ is the biggest technology-focused ETF, with over $950 million in assets.

"The unhedged versions of these two new ETFs have an outstanding performance record, with the indices that the funds aim to track significantly outperforming broad sharemarket benchmarks over the long-term to date," Betashares CEO Alex Vynokur said in a press release ahead of the launch.

Both ETFs track major US technology firms such as the FAANG stocks. However, HETH (and its unhedged version ETHI) filter any companies that don't meet ethical and sustainability criteria.

Earlier this year Betashares removed Facebook from the ETF's holdings citing concerns around the company's Cambridge Analytica scandal.

Currency hedged ETFs are becoming more popular in Australia. The latest two follow the launch of Betashares' currency hedged Global Quality Leaders ETF (HQLT) last month, taking the total number of hedged ETFs on the ASX to 18 this month.

Why use a currency-hedged ETF?

The purpose of a currency-hedged ETF is to minimise the impact of currency fluctuations on returns.

When you invest in a global ETF, your returns partly come down to how high the Australian dollar is compared to the foreign currency of the stocks in the fund. For example, an ETF that holds US companies will be impacted by the AUD to USD. The same occurs when you buy US stocks directly – if the USD rises in relation to the AUD, you can expect to get a higher return once you cash in.

However, if you think the USD is going to fall in the future, you can protect your returns through currency hedging.

"Given that exchange rate movements are difficult to predict in any climate, investors can minimise the impact of fluctuations in the AUD/USD on their returns by being in a hedged exposure," Vynokur told Finder.

"Choosing between the hedged, or unhedged versions will come down to an investor's view on the AUD/USD."

Hedging can make a sizeable difference to your returns. In the last month the BetaShares Global Quality Leaders ETF (QLTY), which is comprised of a mix of companies from around the world, returned -1.45%. Meanwhile, its currency-hedged version HQLT fell just 0.25%, despite holding the same list of companies.

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