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Despite Good Performance, Money Pours Out Of European Stock Funds

We have seen some late 2016 buying in Europe Equity focused HEDJ (WisdomTree Europe Hedged Equity, Expense Ratio 0.58%), but the fund has seen substantial bloodletting this year in terms of assets leaving via redemption pressure.

In the past couple trading sessions, HEDJ has seen about $225 million enter the fund thanks to creation flows, but it has seen a hefty $7.8 billion leave the fund on a net basis year-to-date. Still a $9.2 billion fund in terms of assets under management presently, this is still a huge amount of net redemptions and may reflect investors in European Equity linked ETFs spurning their currency hedge which is a major part of HEDJ’s construction.

We point out that the Euro itself has plunged since Trump’s election in November (and thus the U.S. Dollar has rallied significantly against it). Thus it is very possible that Europe Equity ETF model managers may have been positioning for such an event (a depreciation in the Euro versus the USD) during the course of 2016, judging by the hefty redemptions that are only experiencing very small relief in the last trading sessions of 2016 here.


In spite of the larger redemptions, HEDJ still stands tall as the second largest “Europe Equity” ETF in the U.S. listed marketplace, with $10.7 billion in assets under management, behind the “unhedged” VGK (Vanguard FTSE Europe, Expense Ratio 0.12%, $10.7 billion in AUM) which has also seen substantial redemptions this year ($3.5 billion out). This information, coupled with what we have witnessed in HEDJ in terms of the redemption pressure mentioned above, may simply indicate that investors have largely been working their ways out of “Europe Equity” exposure, both hedged and un-hedged varieties, and shifting to other segments of the equity markets.

The third largest fund in this segment, EZU (iShares MSCI Eurozone, Expense Ratio 0.50%, $7.1 billion in AUM) has also seen larger redemptions to the tune of over $6.6 billion year-to-date, and we would imagine that the issuers in this space such as Vanguard, iShares, and WisdomTree hope that 2017 improves for them in terms of asset gathering — or at least being able to stem the current tide of assets flowing out of such funds.

The WisdomTree Inter Hedged Eq Fund (NYSE:HEDJ) was trading at $57.18 per share on Thursday afternoon, mostly flat on the day. Year-to-date, HEDJ has gained 8.80%, versus an 11.09% rise in the benchmark S&P 500 index during the same period.

HEDJ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 93 ETFs in the European Equities ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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