The fund makes for an interesting exchange - traded fund in that it has one of
the worst tracking errors in the business.
I personally prefer direct holding in US stocks because (a) they are cheaper (b) hedging has debatable benefits but certain costs including
bad tracking error.
Like you say, the whole point of these Horizons ETFs is to avoid
bad tracking errors.
Not exact matches
Trivially, a strategy of never hedging would completely eliminate our Type II
errors - we would always
track market advances, but only at the cost of quadrupling the depth of our
worst losses.
While some research was previously done by his and other groups on a smaller scale, «This is the first real description of a method that could be used broadly across a range of conditions to operationally measure diagnostic
errors and associated
bad outcomes so that we can
track our performance and see whether our interventions are making a difference,» Newman - Toker says.
But then there are foreign exchange rate fluctuations, withholding taxes, sampling
errors etc. that could make the
tracking errors worse (or better).
@CC: I would also suggest that the
tracking error could also be due to
bad timing.
Too much dispersion, or
tracking error, is
bad.
My conclusion based on the short history of currency - hedged funds is that the
tracking error is so
bad that we are better off holding US - based ETFs directly.
Now that Morningstar is
tracking such data, investors
bad behavior is finally quantified, as well the advantages of using a passive advisor who helps reduce investor
error.