The most popular U.S. exchange-traded fund with investors this year was hit by the first weekly outflow since August 2013 after a rally in the euro encouraged investors to be less defensive.
WisdomTree Inc.’s Europe Hedged Equity Fund saw almost $66 million stream out in the week ended May 8, also its largest-ever outflow, according to data compiled by Bloomberg. The fund -- which attracted more money than any other U.S. ETF this year by offering exposure to European stocks as the euro fell 12 percent through mid-April -- suffered as the shared currency rose to a 2 1/2 month high.
Those gains have cast doubt on the extent of further euro losses, encouraging some investors to pare hedges or enter new unhedged positions in Europe. Economic growth in the region has improved as the European Central Bank’s unprecedented program of stimulus takes effect, while data in the U.S. has disappointed.
“People are just trying to play this range right here,” Jonathan Shiffer, the Denver-based head of portfolio management at Curian Capital LLC, which manages about $10 billion including ETF strategies, said by phone. “The bullishness that we’ve seen out of Europe I think will persist. They’re getting their things together and the easing programs are taking effect.”
The euro rose 0.8 percent to $1.1245 as of 12:12 p.m. in New York. The currency climbed the most in 4 1/2 years in April and touched $1.1392 on May 7, the highest level since Feb. 23.
Flows into Vanguard Group Inc.’s FTSE Europe ETF, which takes unhedged positions in Europe, took in more than $372 million last week, the most in a year.
“There’s a lot of competing products out there,” said Eric Mustin, vice president of ETF trading solutions at WallachBeth Capital LLC in New York. “I don’t think it’s a coincidence that WisdomTree’s fund is seeing outflows as the euro has stopped being such a one-way trade.”