Hard currency ETF investments: Trade your view

This year has already proven to be a noisy one in the news cycle – though, in truth, most years are. As we pass the halfway mark, several macro trends are shaping global markets. Whether you’ve already formed your investment view or are still exploring your options, understanding global ETF opportunities is key

Why global ETFs? Why now?

The global ETF market has grown exponentially in both size and sophistication over the past decade. Giants like Vanguard, iShares (BlackRock) and State Street Global Advisors now offer thousands of ETFs spanning every sector, region, and investment theme.

Even those who have already invested globally may find their funds allocated to expensive or opaque investment vehicles.

ETFSA bridges this gap by offering personalised portfolio management that gives clients access to international ETFs in hard currency (typically dollars, euros or pounds). This not only provides diversification away from the rand, but opens the door to contemporary investment opportunities.

Let’s explore five compelling global themes where hard currency ETFs can play a powerful role in a well-diversified portfolio.

The continued dominance of US tech

As the widely considered epicentre of technological innovation, US tech giants continue to shape the global economy. ETFs tracking the Nasdaq-100, AI-focused companies, or Fang+ stocks (Facebook, Apple, Amazon, Netflix, Google and others) offer concentrated exposure to this growth engine.

• Example ETFs include: Global X Artificial Intelligence ETF (AIQ), SPDR S&P Kensho New Economies Composite ETF (KOMP), NYSE FANG+ ETF (FNGU), VanEck Semiconductor ETF (SMGB).
• Why it matters: These ETFs provide access to companies driving the AI and fourth industrial revolutions, cloud computing and digital transformation, all of which are trends that are likely to define the next decade.

Markets beyond the US

While US equities tend to dominate headlines, developed markets outside the US – such as Europe, Japan and Australia – have recently shown strong performance, driven by economic resilience, undervaluation and sector rotation. Other markets such as Latin America are also great diversifiers and provide exposures to countries that are not always as easily accessible, such as Brazil.

• Example ETFs include: iShares MSCI EAFE ETF (EFA), iShares MSCI Europe Small-Cap ETF and iShares Latin America 40 ETF (ILF).
• Why it matters: These ETFs offer exposure to high-quality companies in stable economies, often with attractive dividend yields and lower valuations than their US counterparts.

Niche exposure: European armaments and defence

Geopolitical tensions and increased defence spending across Europe have created a unique investment opportunity in the aerospace and defence sector. This is a niche that’s absent from South African markets but accessible through targeted ETFs. From an ESG perspective, these ETFs focus on conventional defence by excluding companies that are involved in weapons banned by international law and controversial weapons are explicitly excluded.

• Example ETFs include: iShares US Aerospace & Defence ETF (ITA), WisdomTree Europe Defence ETF (WDEF), iShares Europe Defence ETF (DFEU) and, lastly, the VanEck Defence UCITS ETF (DFNS).
• Why it matters: These ETFs provide exposure to companies that are benefiting from rising defence budgets, NATO commitments and long-term government contracts.

A rebound in global real estate

After a challenging few years, global real estate – particularly commercial and logistics-focused real estate investment trusts (Reits) –  is showing signs of recovery. With stabilising interest rates and a growing demand for warehousing, data centres and residential housing, this sector offers income and growth potential.

• Example ETFs include: iShares Core US Reit ETF (USRT), Vanguard Global ex-US Real Estate ETF (VNQI), SPDR Dow Jones Global Real Estate ETF (RWO).
• Why it matters: Real estate offers diversification, inflation protection and attractive yields – particularly when accessed through global Reit ETFs

Alternative investments in digital form

Commodities, particularly gold, have long been considered alternative safe-haven assets, offering diversification in a portfolio from a broad range of risks. More recently investors have sought exposure to digital, or crypto assets as an alternative asset. Most noteworthy of these are cryptocurrencies such as bitcoin and ethereum, and since the introduction of these in ETF form, investors can now access such investments in a highly regulated and safe format, alongside the rest of their exchange traded investment products. While investment professionals remain divided on the longer-term prospect for these sorts of assets, their inclusion with traditional global exchanges has been welcomed by many. 

• Example ETFs include: iShares Bitcoin Trust ETF (IBIT), iShares Ethereum Trust ETF (ETHA), and Invesco Galaxy Ethereum ETF (QETH).
• Why it matters: Digital assets have grown in stature and for investors seeking to house them in a safe environment, listed ETFs offer this option.

ETFSA: Your partner in global investing

At ETFSA, we understand that navigating the global ETF landscape can be overwhelming, which is why we offer a personalised portfolio management service tailored to your investment goals, risk profile and currency preferences.

Our clients benefit from:

• Access to thousands of ETFs across global markets.
• Hard currency exposure to protect against rand volatility.
• Expert guidance on portfolio construction and rebalancing.
• Transparent fees and a client-first approach.

Whether you are looking to tap into the next wave of tech innovation, diversify into developed markets, or explore niche themes like defence or real estate, ETFSA is your trusted partner.

Gareth Stobie is director for strategy and corporate development at ETFSA.

To discuss these topics and more, ETFSA will be hosting a panel discussion and webinar with Currency on Thursday August 7 at 12pm. To register, click here.