The move appears to be a response to the recent sharp movements in major currencies, particularly the fall in the value of the euro relative to the US dollar.
Source has also cut the annual management fee on the unhedged version of the ETF to 0.20% from 0.29%, while the new hedged share classes will also be available at a 0.20% fee.
The JPX-Nikkei 400 ETF aims to provide investors with ‘broad exposure across the large-cap, small-cap, growth and innovation segments of the Tokyo Stock Exchange’.
It was developed by Nikkei and the Japan Exchange Group, and selects stocks on the basis of various factors including size, return on equity, operating profit, transparency and corporate governance.
The hedged versions will use one-month-rolling forward FX contracts, a frequency that provides efficient hedging without excessive cost, according to Source.
The euro-hedged version will trade on Xetra and the dollar-hedged version on the London Stock Exchange. The unhedged version is denominated in Japanese yen and trades on Xetra in euro and on the LSE in both US dollar and British pound.
“Japan has been one of the best performing equity markets over the past year, and the JPX-Nikkei 400 has outperformed better-known benchmarks such as the Nikkei 225 and TOPIX during this period,” said Michael John Lytle, chief development officer at Source.
“However, the stimulus measures that are helping to revive the country’s economic growth prospects are at the same time weakening the yen, which has diminished the overall returns for non-yen investors. The new hedged share classes offer protection from further devaluation – versus either the US dollar or the euro,” Lytle added.
