The value of the euro has weakened over the last 6 months which would affect a few portfolio’s short-term returns. To counteract this amidst the US midterm elections which took place yesterday, SPDR has announced it is issuing a euro-hedged S&P 500 share class.
With a TER of 0.12 per cent, SPDR S&P 500 EUR hedged UCITS ETF (SPPE) is tracking the recently launched S&P 500 EUR Dynamic Hedged Index. SPPE enables investors to invest within the S&P 500 whilst hedging against currency risk. Therefore, the European market can now minimise the return that’s being eaten away by the worsening exchange rate when investing in US equities.
Antoine Lesne, head of SPDR ETF Research & Strategy EMEA, said in an announcement: “As interest rates have diverged over the last few years, causing a relative weakness in the EUR/USD, a EUR investor would have been better off going long on the S&P 500 on an unhedged basis. However, if the ECB acts as expected, and we see a convergence of rates, coupled with a strengthening EUR, this trend is likely to reverse. If this is the case, European investors may be better off hedging their S&P 500 exposure using a EUR hedged index.”