Investors may want to consider hedging their exposure to emerging markets, according to one exchange-traded fund expert.
Ben Slavin, global head of ETFs and managing director of BNY, said that despite notable inflows into Indian, European and Japanese ETFs, investors should consider the strength of the US dollar.
“You have to look at the impact of the dollar on those returns, depending on whether you want to hedge or unhedge, because that’s a very important factor in how things are going to play out in the future,” Slavin said on CNBC’s “ETF Edge” Monday.
One area he pointed out was the level between the US dollar and the Japanese yen.
iShares MSCI Japan ETF (EWJ) gives investors exposure to Japanese stocks, but does not take into account fluctuations in the exchange rate of the Japanese yen and the US dollar. It’s up less than four percent this year.
WisdomTree Japanese Equity Hedged Fund (DXJ)which gives exposure to risk and takes into account fluctuations, grew by more than 20% over the same period.
“It’s important to make decisions about how to allocate funds, especially when it comes to your views on the dollar. And ETFs have different options available to investors to allocate one way or another,” Slavin said.