Gold has been attracting a lot of investor attention recently thanks to global growth concerns and an ultralow interest rate environment in most developed markets across the world. Further, volatility in the market due to swings in oil price and weak corporate earnings season in the U.S. raised demand for the yellow metal as a store of value and hedge against market turmoil (read: How to Trade in Gold ETFs After Robust 30-Year Rally?).
Probably, this is why REX Shares recently rolled out two gold hedged ETFs – REX Gold Hedged S&P 500 ETF (GHS) and REX Gold Hedged FTSE Emerging Markets ETF (GHE). The funds provide exposure to their respective equity index allocation and additionally buy gold futures contracts to gain long gold exposure. Below we highlight the funds in detail:
REX Gold Hedged S&P 500 ETF
GHS tracks the performance of the S&P 500 Dynamic Gold Hedged Index. The fund has a net expense ratio of 48 bps. As of April 15, 2016, Vanguard S&P 500 ETF (VOO - Free Report) comprised almost 85.4% of the fund’s assets, the rest being held as cash. Launched on April 4, the fund has already amassed $2.5 million in its asset base. The fund is up 1.5% in the last 10 days.
REX Gold Hedged FTSE Emerging Markets ETF
The fund seeks to track the performance of the FTSE Emerging Gold Overlay Index. The fund has a net expense ratio of 65 bps. As of April 15, 2016, Vanguard FTSE Emerging Markets ETF (VWO - Free Report) comprised almost 82.1% of the fund’s assets, the rest being held as cash. Launched on April 4, the fund has already amassed $2.6 million in its asset base. The fund is up 3.8% in the last 10 days (read: Can Emerging Market ETFs Sustain the Rally?).
How Do These Fit in a Portfolio?
Both GHE and GHS enable investors to gain exposure to gold while staying invested in equity. Gold hedged investing provides investors a way of accessing gold returns that keep current asset allocations intact. The ETFs pair a core investment area like emerging market or U.S. stock market with a portfolio hedge applied through gold futures contracts.
For example, the advantage of GHE lies in the fact that emerging market currencies can often be expensive to hedge thanks to interest rate differentials and high transaction costs. However, a portfolio comprising emerging market equity will be at risk as and when investors look for safe-haven assets, which impact the price of gold positively. Thus, gold can be a suitable hedge in these situations.
The gold hedging strategy also helps investors to diversify their portfolio and can also protect the portfolio against the weakening U.S. dollar. Thus, these ETFs satisfy the twin objective of preserving and increasing wealth.
GHS and GHE are two groundbreaking ETFs considering that give ETF investors the first opportunity to access both gold and stocks. The newly launched ETFs do not have a direct contender. Thus, the fund would definitely get the first mover advantage.
REX Shares was founded in 2014 with a focus on gold hedged equity investment strategies. The founder of the company, Greg King, has a vast experience in the ETF industry. Thus, we see no hurdle for GHS and GHE in garnering investors’ money.
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