This passive ETF tracks the MSCI Eurozone Index, which covers large- and mid-cap eurozone stocks, while hedging its euro exposure back to the US dollar. It adds currency forward contracts on top of an underlying eurozone ETF to offset exchange-rate movements.

It suits dollar-based investors who want to invest in eurozone equities while reducing the risk of euro-dollar exchange-rate swings.

It is a passive (index-tracking) ETF managed by iShares.

The fund holds an underlying ETF that tracks the MSCI Eurozone Index and overlays currency forward contracts that sell euros for dollars, removing the effect of exchange-rate movements. Countries that do not use the euro and are therefore classified as non-eurozone, such as the UK, Switzerland and Sweden, are excluded from the index, and the hedge ratio is adjusted periodically.

• Euro exposure fully hedged to the dollar
• Eurozone exposure limited to countries that use the euro

Assets under management (AUM) stand at $431.8M, and the expense ratio is 0.53% per year.

The main point of comparison with EZU, the unhedged ETF covering the same eurozone market, is whether the fund carries currency exposure.

Eurozone equity returns depend on the European economy and corporate earnings. Because of the hedged structure, the impact of euro-dollar exchange-rate moves is reduced, but hedging costs are reflected in returns. With currency effects removed, performance tends to track pure share-price movements more closely.

Fund flows into eurozone equities diverge depending on the European economic outlook and risk appetite, and in periods when a stronger dollar is expected, demand sometimes shifts toward hedged products. Hedging costs driven by the euro-dollar interest rate differential also deserve attention.

Removing currency fluctuations is its strength, while hedging costs, concentration in a single currency bloc, and the limited benefit from a stronger euro because of the hedge are points to consider.

A direct unhedged alternative is EZU, which tracks the same eurozone index, and it is the better choice for investors who also want to benefit from a stronger euro. For hedged European exposure, products such as HEDJ and DBEU are options, and for a focus on eurozone large caps, products like FEZ are also worth comparing. The three products shown in the table, VPL, ILF and AIA, represent other regions such as Asia and Latin America, so their regional exposure differs. What sets this ETF apart is that it adds a full currency hedge to eurozone exposure.

These are the points to review before investing in HEZU. Removing currency risk is appealing, but hedging costs, the lack of benefit from a stronger euro, and regional concentration should be checked in advance. It is also worth comparing the fund with unhedged products.

Hedging costs and a European economic slowdown are the main variables for short-term performance, and when the euro strengthens, the fund cannot capture currency gains and may lag unhedged products. Regional risk from concentration in a single currency bloc also exists.

It is a suitable candidate for dollar-based investors who want eurozone equity exposure with reduced currency volatility. Investors who also want to benefit from a stronger euro should compare unhedged products such as EZU, while those who prioritize removing currency risk should consider this fund alongside it.