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Betashares new WisdomTree Europe and Japan ETFs

ETF Watch - Jun 05, 2016

Last month Betashares launched two new ETFs, a Europe based ETF, and a Japan based ETF. Both of these ETFs have been created by Wisdomtree, a US based ETF provider with over $35b under management. Betashares announced back in 2014 that they had signed a strategic alliance with Wisdomtree.

Both of these new offerings are hedged to the Australian Dollar, and as classic smart beta strategies, the index composure is not based on a traditional market cap weighted approach, but rather focuses on dividend paying companies where 80% of the companies’ earnings are generated outside of Europe and Japan.

The charts below show the hypothetical performance of $10,000 invested in each of these funds hedged to US Dollars. Note: the local version will be hedged to Australian dollars not US Dollars, as a result the below chart is figurative only to show performance compared to traditional market index, not the hypothetical performance of the Betashares offerings.

Wisdomtree Europe Equity Index (more information about the index available here)

Wisdomtree HEUR Index

Wisdomtree Japan Equity Index (more information about the index available here)

WisdomTree Japan Index Performance

The above charts show a slight underperformance of the Japan index, and a slight outperformance of the Europe index. Of course past performance should not be used to forecast future performance.

What do these funds compete with?

There are a few European focused ETFs available on the ASX, specifically the UBS IQ MSCI Europe Ethical ETF (UBE), the iShares Europe ETF (IEU) and the Vanguard FTSE Europe Shares ETF (VEQ). All of these provide broad exposure to Europe, with the UBS offering excluding Tobacco and Weapons shares. Management costs of these funds vary from 0.35% to 0.60% pa. None of the existing offerings offer a hedged version however, so the Betashares offering, with exposure to European equities that are currency hedged is unique in this aspect. The Betashares WisdomTree Europe ETF – Currency Hedged is priced at 0.51% pa.

There are two existing Japanese equity ETFs available on the ASX, the iShares MSCI Japan ETF (IJP) and the UBS IQ MSCI Japan Ethical ETF (UBJ), as per the European offering, the UBS version tracks an ethical index, and as per the European ETFs, neither are currency hedged. Their management fees are 0.40 to 0.48% pa. The Betashares WisdomTree Japan ETF – Currency Hedged (HJPN) is the only Japanese ETF with currency hedging and is priced at 0.51%.

Both of these new offerings are brand new, with under $1m invested in each, so liquidity is likely to be low until they get some more investable assets.

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