The Carry Trade At Everyone’s Fingertips With An ETF

Institutional strategies are becoming more and more common for the individual investor, especially with the exchange traded fund (ETF) explosion.

Take into account the carry trade: it is all about selling currencies at low interest rates and buying currencies with high interest rates, and then the investor benefits from the interest rate spread, reports Matthew Hougan for Index Universe.

PowerShares G10 Currency Harvest Fund (DBV) is an unleveraged ETF that invests in a steady pattern of long-term returns with low correlations to market fluctuations. Since its inception in September 2006, it’s up 8.2%. Year-to-date, it’s down 4.5%.

The index invests in U.S. dollars, euros, Japanese yen, Canadian dollars, Swiss franc, British pound, Australian dollars, New Zealand dollars, Norwegian krone, Swedish krona. The expense ratio is at 0.75%. The volatility is low in this ETF because the index takes long and short positions providing consistent and less volatile returns.

Throughout the year, the weightings of each commodity component in the index naturally changes, based on changes in the underlying futures prices.

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