iShares, the world’s largest provider of exchange-traded funds and a division of investment giant BlackRock, has introduced the iShares Currency Hedged JPX-Nikkei 400 ETF (HJPX).

iShares ETF offers access to Japan’s JPX-Nikkei 400 index with an inbuilt dollar/yen hedge.

Designed to provide investors with Japanese equity exposure with reduced currency risk, the fund aims to track the performance of the smart beta JPX-Nikkei 400 Index while striving to mitigate the effects of fluctuations between the US dollar and the Japanese yen through a currency hedging strategy.

US investors are exposed to currency risk when investing in international markets and adverse moves in exchange rates can impact performance in dollar terms. Since 2013, the yen has fallen dramatically as a result of the Bank of Japan’s quantitative easing policy, eroding US dollar-based returns on Japanese equities.

Jane Leung, Managing Director of BlackRock iShares, said: “iShares Currency Hedged JPX-Nikkei 400 ETF allows investors to gain broad exposure to Japanese companies that have been selected based on perceived shareholder-friendly activities, while mitigating for currency movements. Investors can easily combine the fund with its unhedged version, to tailor currency risk while maintaining consistent Japanese equity exposure. The launch of this ETF expands the iShares US currency-hedged suite to 18 funds, a comprehensive offering across global, regional and single country exposures.”

The JPX-Nikkei 400 Index is a broad-based benchmark composed of large- and mid-sized Japanese equities which selects companies based on quantitative and qualitative metrics of quality such as return on equity, cumulative operating profit and corporate governance. The selective approach employed by the JPX-Nikkei 400 index differentiates it from the MSCI Japan Index – also composed of large-and mid-capitalisation Japanese equities – which is tracked by the iShares MSCI Japan ETF (EWJ), and, on a hedged basis, the iShares Currency Hedged MSCI Japan ETF (EWJ).

The fund holds its unhedged parent, the iShares JPX-Nikkei 400 ETF (JPXN) and implements foreign currency forwards to hedge Japanese yen exposure.

Listed on the NYSE Arca, the fund carries a 0.48% net expense ratio which is guaranteed to stay in effect until 31 July 2020. The gross expense ratio is 1.07%.