Investors may want to consider hedging their emerging markets, according to one exchange-traded fund expert.
Although there have been notable inflows into Indian, European and Japanese ETFs, investors should consider the strength of the US dollar, said Ben Slavin, global head of ETFs and managing director at BNY.
“You have to look at the impact of the dollar on those returns, depending on whether you want to hedge or not hedge because it's a very important driver of where things are going in the future,” Slavin told CNBC's “ETF Edge” on Monday.
One area he pointed out is the levels between the US dollar and the Japanese yen.
the iShares MSCI Japan ETF (EWJ) It gives investors exposure to Japanese stocks but does not take into account fluctuations between the Japanese yen and the US dollar. It has grown less than four percent this year.
the Wisdom Tree Japan Equity Hedged Fund (DXJ)which gives exposure and calculates volatility, grew by more than 20% in the same time frame.
“It's very important to make that decision about how you allocate, especially in terms of your views on the dollar. ETFs have these different options available to investors to allocate one way or another,” Slavin said.
