For WisdomTree, when we talk about smart beta, what we are really talking about is a new generation of index-based products that empower investors to explore the core of their portfolios in an attempt to generate better risk-adjusted returns compared to traditional benchmarks.
Prior to the popularization of currency-hedged equity strategies, equity investments outside the U.S. included two trades: the equities and the currency.
When U.S. investors buy equities abroad, either directly or through a fund, they may not realize it but there are two potential sources of return—and risk—in that investment decision: the equities themselves and the currencies of the markets in which those equities are listed.
Recently, the emerging markets (EM) have been embattled in a storm of currency weakness and disappointing performance. However, that tide may be starting to turn.