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Industry’s First ETF for European Small Cap Equity Exposure Without the Euro
WisdomTree (Nasdaq:WETF), an exchange-traded fund and exchange-traded product sponsor and asset manager, today announced the launch of the WisdomTree Europe Hedged SmallCap Equity Fund (EUSC) on the NYSE Arca. EUSC seeks to provide exposure to small capitalization stocks within European equity markets while hedging exposure to the euro. The Fund has a net expense ratio of 0.58%.
Small Cap Equities – A Response to European Central Bank (ECB) Policy Potential:
In Europe – as in other global equity markets – small companies tend to offer big potential, providing access to the local economic prospects. Mario Draghi followed up his promises to do “whatever it takes” and the European Central Bank (ECB) announced a new round of aggressive stimulus that is encouraging momentum and positive economic sentiment for European assets.
Jeremy Schwartz, WisdomTree Director of Research, said, “When you have inflection points – such as the ECB’s decisive action to undertake quantitative easing (QE) by purchasing government bonds and expand the balance sheet – this may be supportive for equities and designated ‘risk’ assets.2 And typically, small caps are often tied to local economic prospects, more so than globally oriented large caps and therefore, more responsive to shifts in local economic cycles. Small caps could be a favored asset class if the ECB QE program successfully reignites inflation and growth in Europe.”
“Building on Success of $12 Billion WisdomTree Europe Hedged Equity Fund (HEDJ)”
The euro continues to be a source of uncertainty. For investors looking to isolate local European equity exposure by removing the euro as a source of risk, the WisdomTree Europe Hedged Equity Fund (HEDJ) has become an important exposure with approx. $12 billion in assets under management.
Schwartz said, “To expand our coverage of European stocks beyond the large capitalization, exporter focus of HEDJ, we have designed EUSC to capture the small cap portion of the equity markets that we believe are more levered to local European growth and revenue.”
“When considering the divergence between the U.S. central bank – which is looking to tighten monetary policy, and the ECB – which undertook more aggressive stimulus, it is reasonable to expect the euro to remain challenged relative to the U.S. dollar. As a result, we believe that currency exposure may negatively impact U.S. investors’ international equity returns,” Schwartz added.
