STOXX Limited, has introduced daily currency hedged versions of the EURO STOXX 50®, EURO STOXX®, EURO STOXX Select Dividend 30®, STOXX® Europe 600 and STOXX Europe Select Dividend 30 indices. The new indices are aimed at investors…..
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seeking exposure to these well-known STOXX benchmarks, while at the same time looking to reduce the risk of currency fluctuations.
The GBP and USD hedged versions of the EURO STOXX 50 Index have been licensed to Lyxor ETF, to underlie two exchange-traded funds, which are available on London Stock Exchange.
“Increasing exchange rate volatility can lead to significant deviations between index performance in local currency, and the returns of non-hedged financial products listed in a different currency,” said Hartmut Graf, chief executive officer, STOXX Limited. “With the launch of our new STOXX Daily Currency Hedged index family, we are offering market participants globally a set of index solutions which enable them to participate in the performance of our flagship indices, while simultaneously limiting risk of currency fluctuations on a daily basis.”
Arnaud Llinas, head of Lyxor ETFs and Indexing, commented: “Thanks to the latest index developments offered by STOXX, Lyxor is able to further enhance its comprehensive range of equity ETFs, providing investors with more accurate tools to hedge the increasing currency volatility. We are pleased to extend our cooperation with STOXX in order to bring efficiency and innovation to the ETF market.”
The new STOXX Daily Currency Hedged Indices replicate a hypothetical investment portfolio designed to represent returns of the underlying index while hedging currency risk on a daily basis, but not the underlying constituent risk. Market participants who employ a currency-hedged investment strategy are generally willing to forgo potential currency gains in exchange for a reduction in the risks associated with foreign exchange fluctuations. To achieve this, the index combines the performance of the underlying index with a hypothetical, rolling investment into foreign exchange forward contracts. These contracts have a one-month expiry and their amount is adjusted daily to reflect the change in the notional amount being hedged, as a consequence of appreciation/depreciation of the underlying index, as well as the change in relative weight of the currencies composing the underlying index.
In addition to the newly launched indices, STOXX offers a set of monthly currency hedged indices as well.