LVHI: Currency Hedging Has Been A Game Changer, But Risks Remain

The Sunday Investor 7.53K Followers Follow Summary Franklin International Low Volatility High Dividend Index ETF is rated a "hold" in this initial coverage article, with a discussion centered around the benefits of its currency hedging strategy. LVHI has been one of the top-performing International ETFs over the last decade, but Index data shows how currency hedging contributed roughly 64 total return percentage points. Currency hedging obviously reduces direct FX exposure. However, currency forward contracts have embedded interest rate differentials, meaning LVHI investors are also exposed to changes in them. This makes LVHI a complex product. Readers must weigh what I consider to be a mediocre underlying portfolio with a currency hedging strategy that may continue to boost returns. tadamichi/iStock via Getty Images Investment Thesis This article initiates my coverage of the Franklin International Low Volatility High Dividend Index ETF ( LVHI ), which offers an appealing dividend yield and an effective currency hedging strategy that has served shareholders extremely This article was written by The Sunday Investor 7.53K Followers Follow The Sunday Investor is focused exclusively on U.S. Equity ETFs. He has a strong analytical background, has received a Certificate of Advanced Investment Advice from the Canadian Securities Institute, and has completed all the educational requirements for the Chartered Investment Manager designation.Having covered hundreds of ETFs on Seeking Alpha, The Sunday Investor has developed a complex, proprietary ETF Rankings system which he shares on his website, etf-rankings.com. Nearly 1,000 ETFs receive individual factor scores covering costs, liquidity, risk, size, value, dividends, growth, quality, momentum, and sentiment, which feed into an easy-to-understand composite score from 1-10. The Sunday Investor is always active in the comments section in his articles - please don't hesitate to reach out via comment in any article or by visiting etf-rankings.com. Happy Investing! Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.