Depending on who you ask, you might hear that Britain is headed for technical recession with the pound sinking even more in value relative to the dollar – or that the country is poised for economic growth following Brexit. Regardless of which view you choose to believe, there's no denying that the British pound had a rough year in 2016, ending as one of the worst performing currencies of the G10. In fact, at one point, the pound plunged to $1.15, its worst showing in over 45 years. (See also: Brexit's Effect on the Market.)

Hovering around $1.30 in 2017, the currency's relative weakness may provide an attractive entry point for investors willing to wait out the economic turmoil and bet on a recovery. If you are considering adding exposure to the British pound, these three exchange-traded funds (ETFs) may be a good place to start. (See also: The British Pound: What Every Forex Trader Needs to Know.)

Note: Year-to-date (YTD) performance figures are based on the period of Jan. 1, 2017, through November 27, 2017. Funds were chosen based on a combination of assets under management (AUM) and performance.

CurrencyShares British Pound Sterling ETF (FXB)

  • Issuer: Guggenheim CurrencyShares
  • Assets Under Management: $213.09 million
  • YTD Performance: 7.41%
  • Expense Ratio: 0.40%

FXB is one of two major players in the British pound space, and it dwarfs the asset base of its only real competitor, the iPath GBP/USD Exchange Rate Fund (GBB). At a cost of 40 basis points, FXB employs the simple strategy of holding physical pounds on deposit, albeit in an uninsured deposit account at JPMorgan Chase & Co. (JPM). The fund has good liquidity and tight spreads, making it easy to trade for even small investors. (See also: Is the Bearish Run Over for British Pound ETFs?)

It is important to note that tax efficiency is an issue with FXB – all gains and distributions are treated as normal income for tax purposes. Performance wise, the fund has been performing well over the past year with a return of 8.09%. However, longer term, it has been more mixed, with a three-year return of -6.34% and a five-year return of -4.15%.

iPath GBP/USD Exchange Rate ETN (GBB)

  • Issuer: Barclays Bank
  • Assets Under Management: $4.41 million
  • YTD Performance: 6.47%
  • Expense Ratio: 0.40%

GBB is the other player offering pure exposure to the British pound space, but with its tiny asset base, it comes with definite risks for the small investor. Average daily volumes are around 288, so liquidity is a definite problem. Moreover, as is the case with FXB, gains from GBB are taxed as ordinary income. (See also: What Britain's Hung Parliament Means for Your Portfolio.)

This fund is structured as an exchange-traded note (ETN), which is a debt security, and it carries all the risks associated with Barclays (BCS), the issuing bank, so it is wise to tread carefully if you are thinking of jumping in. One-year, three-year and five-year returns are 7.80%, -6.74% and -4.53%, respectively.

Powershares DB US Dollar Index Bearish Fund (UDN)

  • Issuer: Invesco
  • Assets Under Management: $43.84 million
  • YTD Performance: 7.11%
  • Expense Ratio: 0.77%

This fund isn't technically a British pound ETF. It actually bets against the dollar versus six major foreign currencies – the British pound, the Japanese yen, the euro, the Swedish krona, the Canadian dollar and the Swiss franc. It works by shorting USDX contracts, which are heavily weighted toward the euro, making it highly sensitive to movements of that currency. The British pound exchange rate is the next biggest chunk of the index, accounting for roughly 20%, compared with 50% for the euro. (See also: UUP vs. UDN: Comparing Bull vs. Bear Dollar ETFs.)

UDN is another moderate-risk investment with less-than-stellar liquidity – average daily volumes are about 52,649. One-year, three-year and five-year returns were 2.36%, -4.05% and -4.20%, respectively. (See also: 5 Reports That Affect the British Pound.)

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