WisdomTree Rolls Out Fund-of-Funds, Hedged ETF

Commentary January 27, 2010 at 07:00 PM

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WisdomTree Investments has just debuted the WisdomTree International Hedged Equity ETF (HEDJ).

HEDJ is benchmarked to the WisdomTree DEFA International Hedged Equity Index, a custom index developed by the New York-based company. The index and the fund are designed to provide exposure to stocks in Europe, Far East Asia and Australia.

To achieve its investment objective, HEDJ invests primarily in other ETFs, namely the WisdomTree Europe Total Dividend Fund (DEB), Japan Total Dividend Fund (DXJ) and Pacific ex-Japan Total Dividend Fund (DND)).

The fund of funds (FOF) ETF category has been one of the fastest-growing areas in terms of new ETFs offered. Instead of investing in individual securities, FOF ETFs invest in other ETFs.

Providers like BlackRock offer target-date FOF ETFs that allocate specified portions in stocks, bonds and other asset classes in line with a person's projected retirement date. For example, the iShares S&P Target Date 2020 Index Fund (TZG) is designed for individuals with a projected retirement date in the vicinity of 2020. TZG invests in nine different iShares ETFs has annual expenses of 0.29 percent. Currently, TZG has around 69 percent committed to stocks and 31 percent to bonds.

According to WisdomTree, HEDJ will also hedge exposure to fluctuations between the value of the U.S. dollar and selected non-U.S. currencies in the regions it tracks.

HEDJ's annual expense ratio is 0.58 percent, which includes the cost of the underlying WisdomTree ETFs it owns.

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