The greatest challenge with Europe may not be its equity markets, but the euro itself. At WisdomTree, we believe the many global brands headquartered in Europe are still attractive investment opportunities. HEDJ offers you a way to access their growth potential, while hedging exposure to the euro.

HEDJ Investment Process

The WisdomTree Europe Hedged Equity Index, which HEDJ is designed to track, uses a rules-based process for selecting and weighting securities while managing the euro risk.

Index Security Selection:

Universe comprised of the largest dividend-paying companies from the WisdomTree DEFA Index (broad developed world ex-U.S.) that are traded in euros, with a minimum market capitalization of $1 billion and with at least 50% of revenues derived from outside Europe.

Index Weighting: Modified Dividend Stream®1

    Companies weighted by Dividend Stream are subject to the following caps:
  • 5% cap to weight in any single company
  • 25% cap to weight in any country
  • 25% cap to weight in any sector

Mechanics of the Currency Hedge:

Local Market Europe Equity Return

+ Euro Return
Hedged Euro Return

Hedged Equity Return

The Fund will implement the currency-hedging strategy by entering into one-month forward currency contracts2 each month and rebalancing at month-end.

1Dividend Stream: Indicated dividends per share x shares outstanding, added up for all constituent firms within the WisdomTree Dividend Index. Indicated dividends refers to the dividends per share that a company has announced it will pay in the coming year.
2One-month forward currency contract: An agreement between two parties to exchange two currencies at a given exchange rate thirty days in the future. This guarantees an exchange rate on a given date.

Time to Buy?

In recent years European equities have been volatile. Yet, there is little question that shares of the world’s leading exporters may be attractively priced and that the earnings derived from their exports may be poised to increase. Of course, European equities are far from being without risk1, and there are many strategies that may mitigate the risk of an equity exposure, but we believe that hedging2 the currency performance of an international equity exposure could be of special interest. Over the past 1-, 3-, 5- and 10-years (as of 6/30/2014), this potential volatility reduction has been apparent through the reduced beta3 of European Equities in Local Currency vs. that of European Equities in U.S. dollars.

Source: Bloomberg, Zephyr StyleADVISOR
* European Equities – Local Currency: MSCI EMU Local Currency Index, in which returns are measured in euros.
** European Equities – U.S. Dollars: MSCI EMU Index, in which returns are measured in U.S. dollars.
*** U.S. Equities – S&P 500 Index.
Past performance is not indicative of future results. You cannot invest directly in an index.

1Risk: Also standard deviation or volatility, a measure of the dispersion of actual returns about an average over a specified period. Larger numbers indicate a greater chance of being farther from that average.
2Hedging: Applying strategies meant to mitigate the impact of currency movements on equity returns.
3Beta: Measure of the volatility of an index or investment relative to a benchmark. A reading of 1.00 indicates that the investment has moved in lockstep with the benchmark; a reading of -1.00 indicates that the investment has moved in the exact opposite direction of the benchmark.

Global Leaders

You drive their cars and wear their clothes. Not only are many of the world's leading companies—and brands you know—headquartered in Europe, but they are truly global companies that generate the bulk of their revenue from exporting to countries outside Europe.

Below are the top 10 holdings in the WisdomTree Europe Hedged Equity Fund (HEDJ).

Sources: S&P, WisdomTree, Bloomberg. Holdings subject to change.

Why Hedge the Euro?

When investing internationally, you face more than simply the volatility of your securities—you also face the volatility of the local currency. Even when your investment is in U.S. dollars, international companies deal in other currencies, which can impact your returns. Sometimes these movements can help your investments, and sometimes, they can hurt them. Hedging exposure to the euro can help mitigate the currency risk.

Source: MSCI for MSCI EMU Index and the MSCI EMU Local Currency Index
Past performance is not indicative of future results.

Read the Research

What if you could separate Europe from the euro?

HEDJ Video

WisdomTree Chief Investment Strategist Luciano Siracusano discusses the current situation in Europe and how hedging exposure to the euro could impact investments in European equities.

Watch

The MSCI EMU (European Economic and Monetary Union) Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU.

The MSCI EMU Local Currency Index is a free-float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU. Returns are not translated back to U.S. dollars.

The WisdomTree Europe Hedged Equity Index is designed to provide exposure to European equities while at the same time neutralizing exposure to fluctuations between the euro and the U.S. dollar. The Index is based on dividend-paying companies in the WisdomTree DEFA Index that are domiciled in Europe and are traded in euros, have at least $1 billion market capitalization and derive at least 50% of their revenue in the latest fiscal year from countries outside Europe. The component securities are weighted in the Index based on annual cash dividends paid with the following caps: maximum individual position capped at 5%, maximum sector weight capped at 25%, and maximum country weight capped at 25%.

S&P 500 Index: Capitalization-weighted index of 500 stocks selected by the Standard & Poor's Index Committee, designed to represent the performance of the leading industries in the U.S. economy.

Unless otherwise stated, data source is WisdomTree.

There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Derivative investments can be volatile and these investments may be less liquid than other securities, and more sensitive to the effect of varied economic conditions. As this Fund can have a high concentration in some issuers, the Fund can be adversely impacted by changes affecting those issuers. Please read the Fund's prospectus for specific details regarding the Fund's risk profile.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. To obtain a prospectus containing this and other important information, please call 866.909.WISE (9473), or visit wisdomtree.com to view or download a prospectus. Read the prospectus carefully before you invest.

Luciano Siracusano is a registered representative of ALPS Distributors, Inc.

WisdomTree Funds are distributed by ALPS Distributors, Inc.

The MSCI EMU (European Economic and Monetary Union) Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU.

The MSCI EMU Local Currency Index is a free-float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU. Returns are not translated back to U.S. dollars.

The WisdomTree Europe Hedged Equity Index is designed to provide exposure to European equities while at the same time neutralizing exposure to fluctuations between the euro and the U.S. dollar. The Index is based on dividend-paying companies in the WisdomTree DEFA Index that are domiciled in Europe and are traded in euros, have at least $1 billion market capitalization and derive at least 50% of their revenue in the latest fiscal year from countries outside Europe. The component securities are weighted in the Index based on annual cash dividends paid with the following caps: maximum individual position capped at 5%, maximum sector weight capped at 25%, and maximum country weight capped at 25%.

S&P 500 Index: Capitalization-weighted index of 500 stocks selected by the Standard & Poor's Index Committee, designed to represent the performance of the leading industries in the U.S. economy.

Unless otherwise stated, data source is WisdomTree.

There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Derivative investments can be volatile and these investments may be less liquid than other securities, and more sensitive to the effect of varied economic conditions. As this Fund can have a high concentration in some issuers, the Fund can be adversely impacted by changes affecting those issuers. Please read the Fund's prospectus for specific details regarding the Fund's risk profile.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. To obtain a prospectus containing this and other important information, please call 866.909.WISE (9473), or visit wisdomtree.com to view or download a prospectus. Read the prospectus carefully before you invest.

Luciano Siracusano is a registered representative of ALPS Distributors, Inc.

WisdomTree Funds are distributed by ALPS Distributors, Inc.

The MSCI EMU (European Economic and Monetary Union) Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU.

The MSCI EMU Local Currency Index is a free-float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU. Returns are not translated back to U.S. dollars.

The WisdomTree Europe Hedged Equity Index is designed to provide exposure to European equities while at the same time neutralizing exposure to fluctuations between the euro and the U.S. dollar. The Index is based on dividend-paying companies in the WisdomTree DEFA Index that are domiciled in Europe and are traded in euros, have at least $1 billion market capitalization and derive at least 50% of their revenue in the latest fiscal year from countries outside Europe. The component securities are weighted in the Index based on annual cash dividends paid with the following caps: maximum individual position capped at 5%, maximum sector weight capped at 25%, and maximum country weight capped at 25%.

S&P 500 Index: Capitalization-weighted index of 500 stocks selected by the Standard & Poor's Index Committee, designed to represent the performance of the leading industries in the U.S. economy.

Unless otherwise stated, data source is WisdomTree.

There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Derivative investments can be volatile and these investments may be less liquid than other securities, and more sensitive to the effect of varied economic conditions. As this Fund can have a high concentration in some issuers, the Fund can be adversely impacted by changes affecting those issuers. Please read the Fund's prospectus for specific details regarding the Fund's risk profile.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. To obtain a prospectus containing this and other important information, please call 866.909.WISE (9473), or visit wisdomtree.com to view or download a prospectus. Read the prospectus carefully before you invest.

Luciano Siracusano is a registered representative of ALPS Distributors, Inc.

WisdomTree Funds are distributed by ALPS Distributors, Inc.

The MSCI EMU (European Economic and Monetary Union) Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU.

The MSCI EMU Local Currency Index is a free-float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU. Returns are not translated back to U.S. dollars.

The WisdomTree Europe Hedged Equity Index is designed to provide exposure to European equities while at the same time neutralizing exposure to fluctuations between the euro and the U.S. dollar. The Index is based on dividend-paying companies in the WisdomTree DEFA Index that are domiciled in Europe and are traded in euros, have at least $1 billion market capitalization and derive at least 50% of their revenue in the latest fiscal year from countries outside Europe. The component securities are weighted in the Index based on annual cash dividends paid with the following caps: maximum individual position capped at 5%, maximum sector weight capped at 25%, and maximum country weight capped at 25%.

S&P 500 Index: Capitalization-weighted index of 500 stocks selected by the Standard & Poor's Index Committee, designed to represent the performance of the leading industries in the U.S. economy.

Unless otherwise stated, data source is WisdomTree.

There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Derivative investments can be volatile and these investments may be less liquid than other securities, and more sensitive to the effect of varied economic conditions. As this Fund can have a high concentration in some issuers, the Fund can be adversely impacted by changes affecting those issuers. Please read the Fund's prospectus for specific details regarding the Fund's risk profile.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. To obtain a prospectus containing this and other important information, please call 866.909.WISE (9473), or visit wisdomtree.com to view or download a prospectus. Read the prospectus carefully before you invest.

Luciano Siracusano is a registered representative of ALPS Distributors, Inc.

WisdomTree Funds are distributed by ALPS Distributors, Inc.

The MSCI EMU (European Economic and Monetary Union) Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU.

The MSCI EMU Local Currency Index is a free-float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of countries within the EMU. Returns are not translated back to U.S. dollars.

The WisdomTree Europe Hedged Equity Index is designed to provide exposure to European equities while at the same time neutralizing exposure to fluctuations between the euro and the U.S. dollar. The Index is based on dividend-paying companies in the WisdomTree DEFA Index that are domiciled in Europe and are traded in euros, have at least $1 billion market capitalization and derive at least 50% of their revenue in the latest fiscal year from countries outside Europe. The component securities are weighted in the Index based on annual cash dividends paid with the following caps: maximum individual position capped at 5%, maximum sector weight capped at 25%, and maximum country weight capped at 25%.

S&P 500 Index: Capitalization-weighted index of 500 stocks selected by the Standard & Poor's Index Committee, designed to represent the performance of the leading industries in the U.S. economy.

Unless otherwise stated, data source is WisdomTree.

There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Derivative investments can be volatile and these investments may be less liquid than other securities, and more sensitive to the effect of varied economic conditions. As this Fund can have a high concentration in some issuers, the Fund can be adversely impacted by changes affecting those issuers. Please read the Fund's prospectus for specific details regarding the Fund's risk profile.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. To obtain a prospectus containing this and other important information, please call 866.909.WISE (9473), or visit wisdomtree.com to view or download a prospectus. Read the prospectus carefully before you invest.

Luciano Siracusano is a registered representative of ALPS Distributors, Inc.

WisdomTree Funds are distributed by ALPS Distributors, Inc.

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