“We just wanted more pure beta exposure to the European stock market,” Mullaney said. “Plus the WisdomTree product is more expensive, so you put those things together and it was a simpler, cleaner story to use HEZU. Not that HEDJ is bad, but it has more bells and whistles than what we were looking for.”
Mullaney said he invested in HEZU last spring. Now, since he doesn’t expect the euro to weaken further, he’s considering buying more European shares without protecting for currency moves. The non-hedged version of the fund, the iShares MSCI Eurozone ETF, has also been luring investors, with its market cap doubling last year.
Mizuho’s Shah says investors will keep trying to shield against currency fluctuations as rate policies between Europe and the U.S. diverge. Both BlackRock and WisdomTree are starting additional products that take a flexible approach to mitigating dollar strength when buying international stocks.
“The currency-hedged European ETF marketplace will definitely grow further as investors refocus on Europe,” Shah said.