The CEW ETF aims for total return that reflects changes in the value of selected emerging market currencies against the US dollar, along with the short-term interest rate performance of those markets. Rather than tracking a specific equity index, it combines currency exposure with collateral assets.

It suits investors who want to add a limited amount of emerging market currency exposure to a portfolio beyond equity and bond holdings.

It is an actively managed ETF run by WisdomTree.

The fund uses a strategy that seeks to reflect both changes in emerging market currency values and local short-term interest rate conditions. It uses US Treasuries and cash-equivalent assets as collateral and adds forward contracts to build its currency exposure, so it carries risk factors that differ from those of equity products.

• Diversified exposure across multiple emerging market currencies
• A currency strategy that combines collateral assets with forward contracts

Assets under management (AUM) stand at $19.7M, and the expense ratio is 0.55% per year.

Because the CEW ETF uses currency forward contracts together with collateral assets, investors should check the gap between the bid-ask quote and net asset value, as well as the factors that drive the underlying currencies, before trading.

The performance of the CEW ETF is influenced by the direction of emerging market currencies against the dollar, regional short-term interest rates and shifts in risk appetite. Currency markets tend to alternate between gains and losses, and changes in regional policy, commodities and the trade environment can amplify volatility.

Fund flows into currency strategy products can be sensitive to the direction of the dollar and to changing preferences for emerging market risk assets. When the global liquidity environment shifts or monetary policy differences between countries widen, investment demand and trading conditions may also change.

The fund is characterized by diversified emerging market currency exposure and a collateral-based structure, but investors must accept volatility stemming from dollar trends and derivatives management.

The FOXY ETF shown in the table shares the currency strategy approach, but its management approach and cost structure need to be checked separately in the prospectus. The FOXY ETF may differ in the nature of its distributions, so rather than simply comparing it with the once-a-year distribution of the CEW ETF, investors should first clarify their cash flow goals. The FOXY ETF may also differ in currency selection and risk management methods, so it is worth examining the underlying currency exposure and the use of forward contracts alongside the CEW ETF.

When evaluating the CEW ETF, investors should not base their judgment solely on expectations for emerging market currencies, but should also check the direction of the dollar, regional interest rate conditions and the forward contract structure. It is also necessary to confirm in advance that the distribution schedule and trading conditions fit the purpose of the holding.

Emerging market currencies can be sensitive to dollar trends, interest rate differentials, capital inflows and outflows, and changes in commodity and trade conditions. In a structure that uses forward contracts, investors should consider not only the movement of the currencies themselves but also risks related to contract rollovers and market liquidity.

The CEW ETF is a product suited to investors who want to add currency factors that differ from equities and bonds to a portfolio. However, because emerging market currencies can be highly volatile, it is advisable to first confirm the role of currency exposure and the level of risk one can tolerate, rather than focusing on whether the fund pays a once-a-year distribution.