SOURCE: Russell Investments

Russell Investments

October 15, 2015 10:30 ET

Currency Indexes: Dollar Volatility and New Survey Highlight New Partial Currency Hedged Index Tools, Supporting Advisor Interest in Currency Hedged Indexes

SEATTLE, WA--(Marketwired - Oct 15, 2015) - Since the US dollar value relative to major foreign currencies, as reflected by the US Dollar Index, hit a multi-year high of 100.39 in March, driven in part by anticipation of a move in US interest rates, it has fluctuated as the FOMC has weighed market input but has not yet taken decisive action.

For the U.S. based investor, USD volatility amid global market uncertainty is of particular concern. Un-hedged international investing embodies an expectation that the value of the US dollar will fall, whereas a 100% hedged approach implicitly assumes the dollar will strengthen.

Investors have considered a new approach; applying a 50% hedge to the USD for a more neutral approach to dollar direction. FTSE Russell has responded with five new international equity indexes with a 50% hedge to the USD.

The first three indexes in the FTSE 50% Hedged Index Series are based on the FTSE Developed ex-North America, FTSE Europe and FTSE Japan Indexes. In July, New York Life MainStay Investments, through its ETF arm Index IQ, launched three new ETFs based on the series of indexes from FTSE Russell.

And according to FTSE Russell's first US retail financial advisor smart beta market survey -- Smart Beta: 2015 survey findings from U.S. financial advisors -- 42% of financial advisors surveyed using ETFs today are using or are interested in using a dividend-weighted or currency hedged investment approach.

Charlie Reinhard, Managing Director and Portfolio Strategist, MainStay Investments, said:
"For many, investing internationally is mainly an equity market choice and not a declaration on exchange rates. A 50% currency hedge can reduce the impact of extreme currency movements that could occur by fully hedging or not hedging at all."

Tom Goodwin, senior research director with FTSE Russell, said:
"Currency fluctuations are notoriously difficult to forecast. Some academics and strategists have supported a 50% hedge ratio, suggesting it represents a neutral currency position. The FTSE 50% Hedged Index Series has been designed as a tool to assist investors in understanding and evaluating the currency exposures of their international equity investments."

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Please note: New York Life & MainStay Investments through Index IQ recently licensed the new FTSE 50% Currency Hedged Index Series as the basis for a new suite of currency-neutral ETFs.

Views expressed by Tom Goodwin and Charlie Reinhard are as of October 15, 2015 and are subject to change. In addition, views expressed by Charlie Reinhard do not necessarily reflect the views of FTSE Russell or the London Stock Exchange Group companies.

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