WisdomTree, the NY-based fifth largest exchange-traded fund sponsor and asset manager with 61 different products that span asset classes and countries, is back with its latest launch – the WisdomTree Bloomberg US Dollar Bullish Fund (USDU). The fund aims to benefit by providing exposure to the US dollar’s appreciation against a broad basket of 10 developed and emerging market currencies.
USDU tracks the Bloomberg Dollar Total Return Index and follows an active management strategy to measure the greenback’s performance against a diversified basket of currencies with the most liquidity and largest US trade flows. It invests in Treasury bills and other investment-grade money market securities, including short-term corporate-debt papers while taking positions in short-term currency forwards.
The underlying index follows a rules-based process and is rebalanced annually to reflect the dynamic nature of today’s global currency markets. Currently, the fund has the highest exposure in the euro (31.23 percent), followed by the Japanese yen (19.24 percent) and the Canadian dollar (11.52 percent). The remaining seven currencies in the index get exposure in single digits. Also, exposure to the Chinese yuan is capped at 3 percent while currencies that are pegged to the US dollar – such as the Hong Kong dollar and the Saudi riyal, are removed from the probable’s list.
From a regional perspective, the Europe, Middle East and Africa (EMEA) region gets the maximum exposure with 44.90 percent asset allocation. Asia comes second with 31.82 percent while Latin America and Canada round off with 11.76 percent and 11.52 percent, respectively.
The fund could be a good choice for those who think the US economy will continue to gain traction going forward since that will allow the Federal Reserve to wind down its asset purchase program.
Reduced money supply is likely to boost the US dollar in 2014 and investors who had closed out their long positions in the dollar earlier due the Fed’s no taper may consider adding long positions now.
The fund has an annual expense ratio of 0.50 percent.
Disclosure: No holdings