Liquid Alternatives: Investors Get Currency Hedged Versions of Vanguard’s Flagship Japan Fund
Investors seeking currency-neutral exposure to Japanese stocks can invest in the new ETFs.
Vanguard has addressed a long-pending demand from European investors for currency-hedged versions of its Vanguard FTSE Japan ETF (VJPN).
The US Dollar hedge version, The Vanguard FTSE Japan USD Hedged ETF (VJPU), is listed on the London Stock Exchange and carries a total expense ratio of 0.20%.
However, the Euro hedge version, the Vanguard FTSE Japan EUR Hedged ETF (VJPE), is listed on the Deutsche Boerse with a total exchange ratio of 0.20%.
In contrast to these funds, the unhedged version has a total expense ratio of 0.15%. The VJPN provides exposure to large and medium-cap Japanese companies. By using the hedged versions, investors can iron out return skews caused by currency fluctuations.
Vanguard hedged Japan fund: About currency risk
When you invest in an ETF that holds foreign securities, you could run a risk from currency fluctuations. Previously, it was difficult for average investors to shield themselves from this risk. With the arrival of currency-hedged ETFs that is no longer the case – investors can protect themselves in a simple, cheap, and effective way.
Therefore, by using a hedged ETF, you can ring-fence your overseas investment from currency volatility. The value of your investment does not gain if the home currency (say, the USD) falls. Conversely, it does not lose value when the USD rises.
By charging you a slightly higher expense ratio, the hedged ETF manager will recover the expenses incurred to hedge the fund from currency risk. These expenses include trading spread, transaction costs and cost of carrying the position (or holding cost).
By this logic, the two Vanguard currency-hedged funds mentioned above protect from currency fluctuations.
Latest Alternative Investment News
Mike Novogratz, the billionaire CEO of Galaxy Digital (TSE: GLXY), was unequivocally critical about Sam Bankman-Fried’s virtual New York Times (NYT) Dealbook Summit interview. “I’m hoping that the authorities get…
“We will be profitable in the next financial year,” TS Anil said at the summit on Thursday, though Monzo reported pre-tax losses of £119mn for the 12 months to the…
OpenAI has unveiled ChatGPT, a new AI system that interacts in a conversational way. As part of a dialogue format, ChatGPT answers followup questions, admits its mistakes, challenges incorrect premises,…
Artificial Intelligence: Monarch’s Electric, Driver-Optional, Smart Tractor Now In Commercial Production
Monarch Tractor has rolled out the first production model of the MK-V tractor that combines electrification, automation, and data analysis to help farmers reduce their carbon footprint, improve field safety,…