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23. July 2015 06:16
by Allan
0 Comments

Half hedged or half baked?

23. July 2015 06:16 by Allan | 0 Comments

Today I read that IndexIQ has launched a trio of 50% Currency-Hedged ETFs, citing leading edge research that shows this is a good thing to do. 

A world first, nonetheless but I do await the next world first when another boutique ETF provider offers a 30% hedged ETF.

In the meantime we have been busy at Twenty20 designing an infinite family of partially hedged ETFs by simply taking a weighted combination of a hedged and an un-hedged ETF .  For example as a GBP investor, to implement an x% hedged exposure to the S&P 500, after ‘extensive’ research we have found that by deploying x% of our capital in the db x-trackers S&P 500 UCITS ETF 4C (GBP hedged) and the remaining (100% - x%) in the Source S&P 500 UCITS ETF we have managed to achieve our goal for an effective blended TER of 30bps * x% + 5bps * (100 – x)%.

Simples!  

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