Investors have rushed into currency-hedged ETFs that invest in stocks in developed markets outside the US. But is the tactic worth it?

Primarily focused on Japan and the eurozone, investors this year have put $23.5 billion into exchange-traded funds that lock in a current exchange rate range to protect against dollar depreciation (through the use of "currency forwards"). These flows represent 48% of all assets spread across 29 such funds, according to XTF, but are mostly parked in a handful of funds managed by WisdomTree Investments, the iShares unit of BlackRock and Deutsche Asset and Wealth Management, a unit of Deutsche Bank.