WisdomTree India Hedged Equity Fund (INDH): Navigating Zero Dividends and Currency Hedging Challenges

The WisdomTree India Hedged Equity Fund (INDH) has emerged as a popular tool for U.S. investors seeking exposure to India's equity markets while shielding portfolios from rupee-dollar volatility. Yet, its recent declaration of a $0.00 dividend in key quarters of 2024 has sparked questions about the fund's underlying performance, hedging costs, and value proposition. This article examines the implications of INDH's dividend decision, evaluates its hedging efficacy, and assesses its relevance in an era of emerging market uncertainty.

The Zero Dividend: A Signal of Underlying Challenges or Hedging Costs?

INDH's dividend history in 2024 reveals a stark pattern: while it distributed $0.12765 in long-term capital gains on December 10, 2024, its June and September distributions were $0.00. This inconsistency raises two critical questions:

1. Is the fund's portfolio generating insufficient income to support regular dividends?
   INDH invests in Indian equities, which often have low dividend yields due to companies prioritizing reinvestment over payouts. For example, the MSCI India Index has a trailing 12-month dividend yield of just 1.2%, compared to 1.8% for the S&P 500. This structural underperformance in income generation may limit INDH's capacity to distribute dividends regularly.

2. Are hedging costs eating into distributable income?
   The fund's 0.63% expense ratio (as of December 2024) includes costs for hedging against rupee depreciation. Currency hedging involves futures contracts or swaps, which can incur fees and opportunity costs, especially during periods of volatility. A would clarify whether these costs are disproportionately high.

The lack of ordinary income or short-term gains in recent distributions suggests that dividends are tied to capital gains rather than steady income streams. This underscores the fund's focus on capital appreciation over income generation—a critical distinction for investors seeking dividends for yield.

Currency Hedging Efficacy: A Double-Edged Sword

INDH's primary selling point is its hedging mechanism, which aims to neutralize exposure to the Indian rupee's fluctuations against the U.S. dollar. Over the past year, the rupee has trended weaker, falling from 82.5 INR/USD to 88.5 INR/USD by June . A

would visually highlight this volatility.

To test hedging success, compare INDH's NAV performance with unhedged India ETFs like INDA during periods of rupee depreciation. For instance, if INDA fell by 5% due to rupee weakness while INDH held steady, the hedging would be effective. However, if both ETFs declined similarly, it could indicate that equity market underperformance outweighed currency risks. A would provide clarity.

Expense Ratio and Return Trade-Offs

At 0.63%, INDH's expense ratio is moderate compared to actively managed funds but higher than passive unhedged peers like INDA (0.55%). This premium reflects the cost of hedging and rebalancing. Investors must weigh these fees against the protection offered. For example, during a rupee sell-off, INDH's hedging could preserve capital, while INDA's unhedged exposure might amplify losses.

However, if the rupee strengthens against the dollar, unhedged ETFs could outperform. Thus, the fund's value hinges on investors' macroeconomic outlook for the rupee. A would help quantify this trade-off.

Is INDH Still Worth Holding?

For U.S. investors prioritizing capital preservation over yield, INDH retains merit. Its hedging provides a buffer against rupee volatility, which has become increasingly pronounced amid India's fiscal deficit concerns and the Fed's rate cycle. Additionally, India's equity markets offer long-term growth potential: its GDP is projected to grow at 5-6% annually, driven by a young workforce and tech innovation.

However, investors must acknowledge three limitations:
1. Low dividend yield: The fund's 0.295% trailing yield (as of June 2025) makes it unsuitable for income-focused portfolios.
2. Currency hedging's timing risk: Persistent rupee strength could render the hedging a drag on returns.
3. Concentration risk: The fund's top holdings include heavyweights like Reliance Industries and HDFC Bank, which may amplify sector-specific risks.

Investment Recommendations

1. Hold INDH if:
2. You seek India exposure without currency risk.
3. You have a 3-5 year horizon to ride out volatility.

4. You can tolerate low income and higher fees.

5. Avoid INDH if:

6. You prioritize dividends for yield.
7. You believe the rupee will strengthen meaningfully against the dollar.
8. You prefer passive, low-cost exposure to India's equity growth.

Conclusion

The $0.00 dividend declaration underscores INDH's identity as a capital-appreciation-focused vehicle, not an income generator. Its hedging mechanism remains effective for mitigating rupee volatility, but investors must weigh this against its expense ratio and the structural limitations of Indian equities. For U.S. investors willing to prioritize stability over yield, INDH retains a niche role in diversifying global equity portfolios—provided they stay mindful of currency and geopolitical risks.