iShares, the exchange-traded fund (ETF) business of BlackRock, (NYSE: BLK), launched three currency hedged ETFs designed to reduce the impact of currency fluctuations on returns when investing in foreign countries. The iShares Currency Hedged MSCI EAFE ETF (NYSEArca; HEFA), iShares Currency Hedged MSCI Germany ETF (NYSEArca: HEWG) and iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) expand iShares broad international line-up that includes the multi-billion dollar, unhedged iShares MSCI EAFE (NYSEArca: EFA), Germany (NYSEArca: EWG) and Japan (NYSEArca: EWJ) ETFs.
Foreign investments often include the added risk of fluctuating exchange rates, which can impact overall returns. The three new iShares ETFs allow investors to access, in a single trade, international exposures while reducing the risk of currency fluctuations. By investing in their related unhedged, parent iShares ETFs (EFA, EWG and EWJ) and implementing foreign currency forward contracts, iShares Currency Hedged ETFs provide an easy and cost-effective way to mitigate unwanted currency risk.
The new funds track indexes by MSCI, the premier international index provider that employs a market-cap weighted methodology and provides comprehensive local country exposure with diversified sector weightings. The funds will also benefit from the deep liquidity of the parent iShares ETFs, which are expected to provide the iShares Currency Hedged ETFs with ample secondary market liquidity and the ability to efficiently create and redeem shares.
The funds are managed by BlackRock’s Index Asset Allocation Team, which has over 50 years of combined experience and manages over $35 billion in currency-related assets. iShares has also managed currency hedged ETFs for over a decade, offering approximately 30 different funds internationally.
Daniel Gamba, Head of iShares Americas Institutional Business at BlackRock, commented:
“Today’s volatile global currency rates are causing investors with international portfolios to pay closer attention to how they can manage currency fluctuations. iShares Currency Hedged ETFs offer an efficient and cost-effective solution in a single transaction, so investors don’t have to manage complex currency hedging strategies. Investors with positive views on Japanese, German or EAFE equities, but negative views on local currencies relative to the U.S. dollar would be interested in these ETF funds.”
Diana Tidd, Managing Director and Head of the MSCI Index Business in the Americas, said:
“With the growth of global investing, the impact of currency movements can be a significant issue. Investors are exposed to currency risk when investing abroad and adverse moves in exchange rates can impact their performance. Hedging currency exposure is one technique for taking currency risk out of the equation.
“For investors using our widely followed market capitalization indexes such as MSCI EAFE and MSCI Japan, the corresponding MSCI Currency Hedged Indexes enable them to directly analyze and measure the performance of a hedged equity index without the impact of currency but keeping the same underlying country and sector exposures. We are pleased that iShares is once again expanding their ETF suite based on MSCI indexes.”
BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At December 31, 2013, BlackRock’s AUM was $4.324 trillion. BlackRock helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of December 31, 2013, the firm had approximately 11,400 employees in more than 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com.
iShares is a global product leader in exchange traded funds with over 600 funds globally across equities, fixed income and commodities, which trade on 20 exchanges worldwide. The iShares Funds are bought and sold like common stocks on securities exchanges. The iShares Funds are attractive to many individual and institutional investors and financial intermediaries because of their relative low cost and trading flexibility. Investors can purchase and sell shares through any brokerage firm, financial advisor, or online broker, and hold the funds in any type of brokerage account. The iShares customer base consists of the institutional segment of pension plans and fund managers, as well as the retail segment of financial advisors and high net worth individuals.
Carefully consider the iShares Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737) or by visiting www.iShares.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Securities focusing on a single country may be subject to higher volatility.
If and when a fund invests in forward foreign currency contracts or uses other investments to hedge against currency risks, it will be subject to special risks, including counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. Increased volatility will generally reduce the effectiveness of a fund’s currency hedging strategy. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. The iShares Currency Hedge ETF’s hedging strategy will not necessarily eliminate the funds’ exposure to the component currencies and there can be no assurance that a fund’s hedging transactions will be effective.
Transactions in shares of the iShares Funds will result in brokerage commissions and will generate tax consequences. iShares Funds are obliged to distribute portfolio gains to shareholders. Shares of the iShares Funds may be sold throughout the day on the exchange through any brokerage account. However, shares may only be redeemed directly from a Fund by Authorized Participants, in very large creation/redemption units. Diversification may not protect against market risk or loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The Fund is not sponsored, endorsed, sold or promoted by MSCI or any affiliate of MSCI. Neither MSCI nor any other party makes any representation or warranty, express or implied, to the owners of the shares of the Fund or any member of the public regarding advisability of investing in funds generally or in the Fund particularly or the ability of the Underlying Index to track general stock market performance. MSCI is the licensor of certain trademarks, service marks and trade names of MSCI and of the Underlying Index which is determined, composed and calculated by MSCI without regard to the Company, BFA or its affiliates or the Fund. MSCI has no obligation to take the needs of the BFA or its affiliates or the owners of the shares of the Fund into consideration in determining, composing or calculating the Underlying Index. MSCI is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Fund to be issued or in the determination or calculation of the equation by which the Fund is redeemable for cash. Neither MSCI nor any other party has any obligation or liability to owners of the shares of the Fund in connection with the administration, marketing or trading of the Fund.
ALTHOUGH MSCI SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEXES FROM SOURCES WHICH MSCI CONSIDERS RELIABLE, NEITHER MSCI NOR ANY OTHER PARTY GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED THEREIN. NEITHER MSCI NOR ANY OTHER PARTY MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE SHARES OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEXES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED BY MSCI FOR USE HEREIN OR FOR ANY OTHER USE. NEITHER MSCI NOR ANY OTHER PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND MSCI HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MSCI OR ANY OTHER PARTY HAVE ANY LIABILITY FOR DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
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