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Wednesday, June 21, 2006|
Six Rydex Currency Shares to Launch
Rydex Investments is almost ready to launch additional currency-based ETFs to complement its Euro Currency Trust (FXE), which listed on the New York Stock Exchange last December. Company representatives met with members of the press for a briefing at the NYSE on Tuesday, but pressed on when the funds will become available, director of trading Steve Sachs would say only that the listing is expected "shortly."
Just as the FXE introduced a simple way for investors to bet on the value of the euro versus the dollar, the new suite of half a dozen products will let world market watchers take chances on the British pound, Canadian dollar, Australian dollar, Swedish krona, Swiss franc and Mexican peso. Each fund actually holds the underlying currency, not contracts, Sachs explained. He declined to comment on reasons why other currencies, such as the yen, were not included.
JP Morgan and Bank of New York are Rydex's global partners on the venture. As with the FXE, shares of four of the new ETFs will represent 100 units of the base currency. Shares of the krona and peso ETFs will represent 1,000 units of these currencies.
"The tool is designed to be used as a hedging product, a speculation product, a diversification tool," Sachs said, explaining that transparency, price protection, and the ability to make both long and short bets make the shares a useful way for individual investors to gain exposure to international currencies. Expense ratios are capped at 40 bps and investors can purchase as little as one share, but Rydex is distributing the product through RIAs, broker-dealers and advisors, and asking retail investors to rely on professional advice.
Princeton professor John Mulvey, a consultant to the company, went over the key points of his Rydex white paper, Essential Portfolio Theory, which concerns the ways individual investors can rev up portfolios by imitating, to a certain extent, the traditional practices of institutional investors. Sachs said the paper points to Rydex's anticipation of "evolution" in the industry, including "different structures to the underlying indexes themselves."
"We're saying, start thinking about new ways to get exposure," he said.
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