BlackRock Has a Not-So-Secret Formula for Predicting the Dollar
- New ETFs use momentum, valuation, volatility to hedge FX risk
- WisdomTree rolling out its own dynamically hedged funds
An employee places U.S. one-hundred dollar currency banknotes into a money counting machine at a bank branch inside the FHB Commercial Bank Ltd, also known as FHB Kereskedelmi Bank Zrt, headquarters in Budapest, Hungary on Tuesday, Nov. 10, 2015. Hungary moved closer to regaining its investment grade status at Moody's Investors Service after Prime Minister Viktor Orban's government helped reduce the country's debt load and kept the budget deficit in check.
Photographer: Akos Stiller/BloombergFor U.S. investors tired of sweating the dollar’s trajectory, BlackRock Inc. says it has the solution: a formula that decides when to hedge the currency risk of international stocks.
The world’s largest money manager is applying the blueprint to a trio of new exchange-traded funds that aim to anticipate dollar strength by measuring four indicators: momentum, valuation, volatility and yield differential. By using trading strategies more commonly associated with hedge funds, BlackRock plans to lure investors seeking to protect the value of overseas returns from dollar gains, while preserving tailwinds from stronger foreign currencies.