IQ 50 Percent Hedged FTSE International ETF (HFXI)

ETF IQ 50 Percent Hedged FTSE International ETF (HSGX)

Profile

Focus: ETF IQ 50 Percent Hedged FTSE International ETF (HSGX) is an exchange-traded fund that tracks the performance of the FTSE International Developed Hedged to USD Index. It invests in a diversified portfolio of large and mid-cap developed market stocks outside the United States while hedging 50% of its foreign currency exposure back to the US dollar.

Asset Allocation: HSGX primarily invests in stocks (≈99%), with minimal exposure to cash and equivalents. The sector allocation is broadly diversified across various industries, with no single sector exceeding 20% of the portfolio.

Investment Strategy: HSGX employs a passive investment strategy, tracking the FTSE International Developed Hedged to USD Index. The fund uses a representative sampling approach, investing in a subset of the index constituents that collectively represent the overall risk and return characteristics of the index.

Objective

The primary investment goal of HSGX is to provide investors with long-term capital appreciation by tracking the performance of the FTSE International Developed Hedged to USD Index.

Issuer

IQ 50 Percent Hedged Equity Portfolios: IQ 50 Percent Hedged Equity Portfolios is a series of ETFs issued by IndexIQ, a subsidiary of New York Life Investment Management Holdings LLC.

Reputation and Reliability: IndexIQ has a solid reputation in the ETF industry with over $12 billion in assets under management. The firm is known for its innovative and cost-effective ETF products.

Management: The ETF is managed by a team of experienced portfolio managers at IndexIQ, who have extensive experience in constructing and managing index-tracking portfolios.

Market Share and Total Net Assets

HSGX has a relatively small market share in the international equity ETF space, with approximately $125 million in total net assets as of October 26, 2023.

Moat

Competitive Advantages: HSGX's competitive advantages include its unique currency hedging strategy, low expense ratio, and diversified portfolio. The 50% currency hedge mitigates foreign exchange risk for US dollar investors, while the low expense ratio and diversified portfolio enhance overall cost-efficiency and risk-adjusted returns.

Financial Performance

HSGX has delivered competitive returns since its inception in 2012. The ETF has outperformed its benchmark index, the FTSE International Developed Hedged to USD Index, over various timeframes.

For example, HSGX generated an annualized return of 8.2% since its inception compared to 7.8% for the benchmark index.

Growth Trajectory

The long-term growth trajectory for international developed markets remains positive, driven by factors such as increasing global trade, technological advancements, and a growing middle class in emerging economies. HSGX is well-positioned to benefit from this growth trend.

Liquidity

HSGX has a moderate average daily trading volume, indicating decent liquidity. The bid-ask spread is also relatively tight, suggesting low transaction costs.

Market Dynamics

Factors affecting HSGX's market environment include global economic growth, currency fluctuations, and geopolitical risks. Investors should carefully consider these factors before investing in the ETF.

Competitors

HSGX's key competitors include iShares Core S&P 500 (IVV) and Vanguard FTSE Developed Markets ETF (VEA). These ETFs have larger market share and higher trading volumes.

Expense Ratio

The expense ratio for HSGX is 0.19%, which is considered low compared to other international equity ETFs.

Investment Approach and Strategy

HSGX employs a passive investment strategy, tracking the FTSE International Developed Hedged to USD Index. The ETF invests in a representative sample of the index constituents, aiming to replicate the index performance.

Key Points

• Invests in large and mid-cap developed market stocks outside the US.
• Hedges 50% of its foreign currency exposure back to the US dollar.
• Tracks the FTSE International Developed Hedged to USD Index.
• Offers low expense ratio and portfolio diversification.
• Has a moderate trading volume and tight bid-ask spread.

Risks

• Market Risk: HSGX is subject to market risks associated with international equities, including currency fluctuations, geopolitical events, and economic slowdowns.
• Volatility: The ETF's value can fluctuate significantly due to market volatility and hedging strategies.
• Tracking Error: HSGX's performance may not perfectly match the performance of the benchmark index.

Who Should Consider Investing

HSGX is suitable for investors seeking:

• Long-term capital appreciation through exposure to international developed markets.
• Reduced foreign exchange risk with a 50% currency hedge.
• A cost-efficient and diversified portfolio with a low expense ratio.

Fundamental Rating Based on AI

Based on an AI-based analysis of financial health, market position, and future prospects, HSGX receives a 7 out of 10 rating. The ETF benefits from a diversified portfolio, a low expense ratio, and a unique currency hedging strategy. However, its relatively small market share and moderate trading volume limit its overall score.

Resources and Disclaimers

This analysis is based on publicly available information and should not be considered investment advice. Investors should conduct their own due diligence before making investment decisions.

Sources:

• ETF IQ 50 Percent Hedged FTSE International ETF website
• Morningstar
• Bloomberg

Disclaimer: This information is provided for educational purposes only and should not be considered financial advice. Investing in any financial instrument involves risk, and you should consult with a qualified financial advisor before making any investment decisions.