Though a hedge can drive outperformance during a currency shock, in the medium to long-term the performance differential between hedged and unhedged ETFs tracking the same index diminishes.
Then there are other asset classes such as fixed income where investors see more value of an FX-hedged ETF to cushion the blows from a volatile currency on tiny but steady returns from coupon payments on bonds.
"Right now, if we look at our asset split, the proportion of flows into currency-hedged ETFs is larger in the fixed income space," said Deutsche's Wiegand.
Some 37 percent of Deutsche Asset Management's year-to-date net inflows in fixed income ETFs went into hedged products, while just 21 percent of their equity inflows were hedged.
This article was provided by Reuters.