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New Exchange Traded Fund Makes Sophisticated Investment Strategies Available to ETF Investors
The world of Exchange Traded Funds has been expanding choices to investors at an astounding rate.

After dissecting stock sectors every which way, new funds were established that moved into the areas

of commodities by allowing investors to invest in oil, metals and currencies.

Now the choices are becoming even more sophisticated. A new fund (Powershares DB G10 Currency Harvest

Fund) has been created that aims to profit when the currencies of countries with higher interest

rates outperform those with lower interest rates. This is known as the currency carry trade. This

index is comprised of the group of 10 currencies which are: U.S. dollar; euro; Japanese Yen; Canadian

dollar; Swiss franc; British pound; Australian dollar; New Zealand dollar; Norwegian krone, and Swiss

krona.

The strategy here is that the index is designed to exploit the trend that currencies associated with

relatively high interest rates tend to rise in value relative to currencies associated with low

interest rates. This sophisticated index reflects long futures positions in three currencies with the

highest interest rates, and short positions with the three currencies with the lowest interest rates.

If one of three highest interest rate or three lowest interest rate currencies is the US dollar, the

fund will not take a position.

Collateral for the currencies is provided by short-term treasury bills. This fixed income part of the

portfolio provides yield which is used to offset the ETF fees.

Investors are looking for new asset classes to invest in. Currencies have a low correlation to stocks

and bonds. The stock and bond markets have been recently been flat areas for investment money. The

currency markets provide an asset class for investors to put their money. This is especially taking

on significance now since the real estate market which has been attracting investment money, is now

slowing down, especially in the residential sector.

This fund is much different from the single currency Exchange Traded funds such as the Euro Currency

(FXE) fund that is managed by Rydex. This fund buys euros rather then currency futures. Rydex also

manages currency funds tied to the British pound and the Mexican peso.

Unlike other currency related Exchange Traded Funds, the G10 Harvest fund is moving into the area of

hedge funds with its sophisticated strategies. It is not just betting on the up down movements of a

particular currency, but a rate spread strategy.

This leveraged long/short strategy has been used recently to take advantage of rock bottom interest

rates in countries such as Japan and Switzerland. There is a risk, and that is that the US dollar

will lose value against the Yen. Hedge funds and speculators have been making money on this trade.

Now it appears they are starting to unwind their positions. There is some speculation that the carry

trade has artificially propped up currencies that have higher interest rates.

For small investors, this fund gives them entrance to a strategy that only the larger players had

access to. Even though this trade has been historically profitable, there is always a risk. Investors

should understand the trade and the risks involved. This type of investment is not for everyone,

however there are a number of small investors that may be attracted to it.

Traders should understand that this fund is highly speculative. It is intended as more of a long term

investment and should not be used for frequent trading due to potential negative tax consequences.

Traders could be lured into potentially damaging and costly trading. For US investors, this tool

could be used for a long term diversification tool. With the political situation so volatile in the

middle east and the economic consequences of interruption of energy supplies, investors must realize

these markets can be very volatile which increases the risk.
Throughout our partnership with the industrial leaders, we are capable of delivering incomparable

quality of online currency trading service.
ForexGen services are all controlled by the international banking and financial regulatory standards.
ForexGen is continuously providing the Forex market's safest trading terms & conditions. Providing

professional currency trading services that meet our client's expectations is our first priority.