Deutsche Bank, the pioneer in currency-hedged equities
investing, filed regulatory paperwork this week putting into
registration three more currency-hedged strategies using riffs on
MSCI indexes that are focused on Asia excluding Japan, Europe and
the United Kingdom.
The three new proposed Deutsche Bank
and their respective strategies are as follows:
db X-trackers MSCI Asia Pacific ex Japan Hedged Equity
, which will protect investors from a number of currency crosses
with the dollar related to investing in developed as well as
emerging market countries including Australia, China, Hong Kong,
India, Indonesia, Malaysia, New Zealand, Singapore, South Korea,
the Philippines, Taiwan and Thailand
db X-trackers MSCI Europe Hedged Equity Fund
which will protect investors from a number of currency crosses
with the dollar related to investing in Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the
db X-trackers MSCI United Kingdom Hedged Equity
, which will take fluctuations between the dollar and the British
pound sterling off the table
Two of the three planned funds, the Europe-focused strategy and
the U.K.-focused strategy, seem squarely aimed at strategies that
have already been brought to market by WisdomTree Investments,
Deutsche Bank's arch rival in the currency-hedged ETF space.
WisdomTree, of course, is the sponsor behind the $9.42 billion
WisdomTree Japan Hedged Equity Fund (NYSEArca:DXJ).
DXJ's huge success in the past several months has made it the
most popular U.S.-listed ETF this year, and has brought the
potential virtues of currency-hedged investing into sharp focus.
DXJ has returned more than 24 percent this year, with its currency
hedge preserving half of those returns to the extent that the yen's
nearly 13 percent slide again the dollar isn't part of DXJ's
An Ill-Advised Marketing Bonanza?
The sliding yen is, however, a distinct story involving
concerted efforts by Japanese policymakers, and it's not at all
clear whether other strategies on the market or in registration
will be successful.
What is clear is that a lot of marketing energy is now going
into the currency-hedged space.
As noted, two of the three ETFs Deutsche put into registration
this week-the Europe fund and the U.K. fund-look a lot like two
funds that WisdomTree has already has on the market.
The WisdomTree United Kingdom Hedged Equity
Fund (NasdaqGM:DXPS) launched today, and the WisdomTree
Europe Hedged Fund (NYSEArca:HEDJ) has gathered almost $325 million
in assets under management.
Deutsche Bank's ace in the hole going forward is its use of MSCI
indexes, which means large institutional players looking to hedge
currency exposure can do so with tighter controls to the extent
that they frequently benchmark their performance to MSCI
Some of Deutsche's strategies have also benefited from the
DXY-related craze. For example, the db X-trackers MSCI Japan Hedged
Equity Fund (NYSEArca:DBJP) now has $116 million in assets-a
fraction of DXJ's, but a lot more than it had at the time DXJ's
asset gathering went "parabolic."
Deutsche didn't include ticker symbols or proposed expense
ratios for the three new funds, but did say it would have their
primary listings on Arca, the New York Stock Exchange's electronic
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