Deutsche Bank today launched the db X-trackers MSCI Germany
Hedged Equity Fund (NYSEArca:DBGR), the market's first
currency-hedged take on German equities, serving up access to
German-listed stocks while neutralizing exposure to currency
fluctuations between the euro and the dollar.
The firm beat WisdomTree to the punch, which has a similar
strategy-the WisdomTree Germany Hedged Equity Fund-still sitting in
the regulatory pipeline.
Deutsche Bank and WisdomTree have competed in the realm of
before, most notably with their respective Japan-focused
strategies, but Deutsche might be hoping that a first-to-market
status will help with its asset-gathering goals, if the experience
it has had with its Japan-hedged equity fund "DBJP" is any
Indeed, DBJP has outperformed its WisdomTree counterpart, the
now-$10 billion WisdomTree Japan Hedged Equity Fund (NYSEArca:DXJ)
year-to-date, but DBJP remains a far cry from DXJ's blockbuster
success in terms of total assets. Still, DBJP is now a $100 million
fund, built on net creations of $110 million so far this year.
DBGR also marks the end of the db-X MSCI Canada Hedged Equity
Fund (NYSEArca:DBCN), as Deutsche is essentially retrofitting that
$4 million fund with a new name, new index and new ticker, keeping
only its CUSIP the same. The Germany-focused version of the fund
will come with an annual expense ratio of 0.50 percent, or $50 for
each $10,000 invested-the same price as DBCN.
The launch could come at a good time for Germany-listed
equities, which struggled earlier this year to shake off the
eurozone debt malaise that has been centered on countries like
Greece, Spain and Italy. Those economies have recently turned
around, and throughout the three-year crisis, Germany has remained
the leading economy in the region-a safe haven of sorts in the
DBGR will join the unhedged iShares MSCI Germany Index Fund
(NYSEArca:EWG)-also linked to an MSCI index-that has been around
since 1996, and has accumulated nearly $3 billion in total
EWG has tallied gains of 7.3 percent year-to-date, with much of
those gains coming in the past month. What's more, the performance
has come despite net outflows of $1.18 billion since the beginning
of the year, according to IndexUniverse's ETF Flows Tool.
Peeling off the currency exposure from a portfolio of German
equities, however, would not amount to significant gains for U.S.
investors right now.
Unlike exposure to the Japanese yen, for instance, the 12-month
rolling impact of the euro versus dollar rate adds an extra 4.4
percentage points to U.S. investor returns at the moment, according
to IndexUniverse's Currency Impact tool.
Still, the concept behind the ETF is that currency fluctuation
can be detrimental to U.S. investors-mainly when the U.S. dollar
rises in value-and DBGR addresses that.
DBGR will track the MSCI Germany US Dollar Hedged Index, which
comprises large- and midcap companies representing together about
85 percent of Germany's equities universe. The portfolio includes
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