iShares Currency Hedged MSCI EAFE Small-Cap ETF(AMEX:HSCZ)

HSCZ, launched July 1, 2015, offers no-frills exposure to small-cap developed-market stocks outside the US and Canada, with a currency hedge for US investors. The fund holds large and liquid SCZ to provide the equity exposure, which in turn holds the underlying stocks directly. This structure is akin to a Russian doll, rather than a derivative. Still, derivatives are used for the FX hedge: 1-month forward contracts. We see little additional risk from the forwards themselves, which should provide effective, but not perfect, hedging. HSCZ charges a reasonable fee, but tracking stats won`t be helpful as a gauge of holding costs. Its tracking err will look bad because its NAV is based on the market price of SCZ, which can trade when the index`s stock markets are closed. In all, HSCZ offers a straightforward basket of currency-hedged stocks. Trade the new fund with care.