Energy prices to benefit from rebound in US demand
Limited exposure to currency risk through daily hedging….
ETF Securities, one of the world’s leading, independent providers of Exchange Traded Products (ETPs) has launched ETFS EUR Daily Hedged Energy DJ-UBS EDSM (00XU GY) on Deutsche Boerse today. The new currency-hedged investment solution will complement the firm’s existing range of EUR daily hedged commodity products and offers an inbuilt daily currency-hedging mechanism, mitigating the effect of currency volatility in investors’ portfolios by reducing exposure to the US Dollar.
Reducing exposure to currency risk
Currency hedged ETCs help offset the natural currency risk to which an investor in non-local currency assets is exposed. This is particularly useful for investors with specific local currency return mandates. Currency hedged ETCs also provide shorter-term tactical investors with the ability to increase their returns by choosing the currency of their exposure.
An additional benefit of the daily hedging is the frequency at which the swaps are reset. An ETC which tracks an index that hedges currency risk on a daily basis will tend to be more accurate in providing returns that reflect true underlying asset returns than those that hedge on a monthly basis or only reset the swaps on a monthly basis
The outlook for energy
Since April, the price of Brent has risen by around 10%, while the price of WTI has surged around 20% as stronger-than-usual demand from refineries has helped reduce US oil inventories. ETF Securities Head of Research & Investment Strategy, Nicholas Brooks commented that:
“Energy is integral to economic growth and development and movements in energy prices often have either a direct or indirect impact on most investment portfolios. Therefore energy is a commodity sector that cannot be ignored by investors. Oil prices have historically acted as one of the best hedges against inflation and more recently have provided a hedge against Middle East risk. US natural gas prices are currently trading near their marginal cost of production, indicating potential for longer-term gains. As China and other large population emerging market countries continue to develop, in our view, energy prices will need to rise to incentivise more efficient energy consumption and stimulate the investment and innovation necessary for supply to meet growing demand.”
Commenting, Massimo Siano, Head of France & Italy, ETF Securities said:
“We made the decision to launch ETFS EUR Daily Hedged Energy in order to complement our existing range of successful euro hedged commodity products. We’ve also witnessed a growing demand for currency hedged ETPs in Spain. The product will provide a transparent and cost-efficient exposure for our euro-based investors whilst mitigating unwanted currency exposure.”
ETFS EUR Daily Hedged Energy DJ-UBS EDSM is issued by Jersey based ETFS Hedged Commodity Securities Limited and is designed to provide investors with a total return exposure to energy futures with a daily currency hedge against movements in the EUR/USD exchange rate by tracking the Dow Jones-UBS Energy Sub-Index EUR Hedged DailySM (the “Index”) and providing a collateral yield. The Index is designed to reflect the movement in the price of the futures contracts of the energy commodities used in the Dow Jones-UBS Commodity IndexSM namely, WTI Crude Oil, Natural Gas, Brent Crude, Unleaded Gasoline and Heating Oil.
Product Information
Security | Exchange Code | ISIN | Bloomberg | Reuters | TER |
ETFS EUR Daily Hedged Energy DJ-UBS EDSM | 00XU | DE000A1Y7Y36 | 00XU GY | .00XU | 0.49% |
Source: ETFWorld.co.uk – ETF Securities
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