Currency Hedging Comes To A-Shares ETFs
Currency hedged exchange-traded funds are one of the fastest-growing segments of the ETF universe. With several of these funds ranking among this year's top asset-gathering ETFs, issuers are seizing that momentum with a spate of new products.
Now, investors can access Chinese A-shares, the stocks trading on mainland bourses in Shanghai and Shenzhen, with a hedge against yuan depreciation relative to the U.S. dollar via the new Deutsche X-trackers CSI 300 China A-Shares Hedged Equity (NYSE: ASHX). This is the world's first currency hedged A-shares ETF, debuted Tuesday courtesy of Deutsche Asset & Wealth Management (Deutsche AWM), the ETF issuing arm of German banking giant Deutsche Bank AG (USA) (NYSE: DB).
New Currency Hedged ASHX
The ASHX is the currency hedged equivalent of the Deutsche X-Trackers Harvest CSI 300 China A-Shares ETF (NYSE: ASHR). ASHR, which debuted nearly two years ago, is home to over $564 million in assets under management, making it the largest A-shares ETF trading in New York.
China's recently revealed, heavy-handed approach to managing the value of the yuan could make the ASHX a “right place, right time” ETF.
“China recently announced a new method of valuing the Chinese yuan, allowing market forces to play a greater role in the Chinese currency markets. As a result, between August 10–August 25, the yuan weakened by more than 3 percent against the US dollar, causing USD/Yuan volatility to spike and remain at elevated levels. ASHX seeks to minimize exposure to such currency fluctuations and solely capture the performance of pure large- and mid-cap Chinese A-share equities,” said Deutsche AWM in a statement.
The Index And Methodology
The new ETF follows the CSI 300 USD Hedged Index, the currency hedged equivalent of the widely followed CSI 300 Index, which is ASHR's underlying benchmark.
ASHX follows a methodology that has become popular with some new currency hedged ETFs in that the new fund has just one equity holding, in this case it is the unhedged ASHR, along with the currency hedged overlay.
ASHX charges 0.85 percent per year, or $85 for every $10,000 invested. Deutsche AWM also issues the $42.3 million Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap ETF (DBX ETF Trust (NYSE: ASHS)).
“With assets totaling USD 19.6 billion as of October 15, 2015, the Deutsche X-trackers platform has increased by approximately 360 percent since year end, and continues to be among the fastest growing exchange-traded fund (ETF) franchises in the US. The firm’s global exchange traded products platform is now the world’s fifth largest, with approximately USD 76.9 billion in assets under management as of September 30, 2015,” said Deutsche AWM in the statement.
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