Deutsche Bank has renamed its five U.S.-listed currency-hedged
in a marketing-focused move designed to increase the profiles of
the funds at a time when at least one similar strategy from a
competing provider has stolen the show.
Deutsche is responding to the success of the WisdomTree Japan
Hedged Equity ETF (NYSEArca:DXJ), which raked in $1 billion last
month and now has more than $2 billion in assets. Inflows into
Deutsche's competing db-X MSCI Japan Currency-Hedged Equity Fund
(NYSEArca:DBJP) are negligible, and assets are static.
DXJ's success at gathering assets has largely been due to
Japanese Prime Minister Shinzo Abe's aim to weaken the yen as part
of a broad new initiative designed to help lift the world's
third-largest economy out of nearly 25 years of slow growth and
persistent deflationary pressures. ETFs like DXJ and Deutsche's
DBJP protect U.S. investors from the damage a weakening yen has on
The affected funds, all of which still trade under the same
tickers, are as follows:
- Db-X MSCI Japan Currency-Hedged Equity Fund (NYSEArca:DBJP),
now called the db X-trackers MSCI Japan Hedged Equity Fund
- Db-X MSCI Emerging Markets Currency-Hedged Equity Fund
(NYSEArca:DBEM), now called db X-trackers MSCI Emerging Markets
- Db-X MSCI EAFE Currency-Hedged Equity Fund (NYSEArca:DBEF),
now called the db X-trackers MSCI EAFE Hedged Equity Fund
- Db-X MSCI Brazil Currency-Hedged Equity Fund (NYSEArca:DBBR),
now called the db X-trackers MSCI Brazil Hedged Equity Fund
- Db-X MSCI Canada Currency-Hedged Equity Fund (NYSEArca:DBCN),
now called the db X-trackers MSCI Canada Hedged Equity Fund
The new nomenclature, which took effect Feb. 1, accomplishes two
things, according to Deutsche Bank officials.
Firstly, it aligns the U.S.-listed ETFs with Deutsche's global
brand, "db X-trackers," which is a strong market name in Europe but
far less known in the States.
The company had avoided the "db X-trackers" moniker in part
because it has been associated with derivatives-based
strategies-something U.S. investors have viewed with greater
reservations than in Europe. Europe, it appears, is moving toward a
U.S.-like wariness, industry sources said, making the db X-trackers
brand more attractive in the United States.
Secondly, the changes remove the word "currency" from the names
of the funds to help stamp out any doubt about what the funds
Germany-based Deutsche Bank's U.S. ETF unit is hoping that the
changes will help investors better understand that the ETFs are
equity funds with a currency hedge overlay rather than currency
strategies-a confusion some ETF industry sources say may have
hindered the funds' success in the market.
A Flop That Shouldn't Be One
You'd think a fund like the db-X MSCI Japan Currency-Hedged
Equity Fund (NYSEArca:DBJP), which serves up broad access to
Japanese equities while neutralizing the dollar-yen currency cross,
might be attracting a lot of assets now that Japan appears
committed to boosting growth by weakening the yen.
After all, DBJP serves up broader access to Japanese companies,
and is basically a currency-hedged version of the dominant Japan
equities fund in the ETF market, the $5.7 billion iShares MSCI
Japan Index Fund (NYSEArca:EWJ).
That should, in theory, make DBJP the perfect fund to pair with
EWJ, according to Ugo Egbunike, an ETF analyst with IndexUniverse.
But it hasn't.
Assets in DBJP are now around $5.5 million, with any increases
along the way a function of rising equity prices rather than new
inflows, which have been almost nonexistent since the fund's
Instead, as noted, WisdomTree's DXJ has garnered all the assets.
The fund has a tilt to export-related Japanese firms that
WisdomTree says will benefit from a weakening yen perhaps more
than, say, domestic-focused Japanese companies.
Part of DBJP's problem is that it doesn't trade with nearly as
much liquidity as DXJ, which adds costs when investors buy and sell
the ETFs, IU's Egbunike said. Deutsche officials say that liquidity
is improving, which should help marketing efforts.
They also said that marketing of the U.S. ETF db X-trackers
brand will now be handled internally, infusing the entire endeavor
with greater purpose. It was previously handled by a number of
Deutsche's presence in the U.S. ETF industry is already
considerable, though some investors may not recognize it.
The company sponsors more than 40 funds that are marketed by
Invesco PowerShares under the brand "PowerShares DB." Assets under
management are in excess of $13 billion, which puts Deutsche in the
ranks of the top 10 U.S. ETF sponsors, according to IndexUniverse's
latest daily ETF League Table.
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