The universe of equity hedged ETFs continues to grow with the
introduction of three new products from Deutsche Asset &
Wealth Management this week.
The niche group of ETFs have garnered attention after the
success of the WisdomTree Japan Hedged Equity ETF (NYSE:
). The ETF now has over $10.8 billion in total assets.
Investing in individual countries or regions around the globe
has been popular for many years via ETFs. However, investors have
often been at the mercy of currency fluctuations that would
greatly alter the actually performance of the index the ETF is
designed to track. Japan is a great example for U.S.-based ETF
investors. The iShares MSCI Japan Index ETF (NYSE:
) is up 20 percent in 2013, as DXJ has been able to gain 25
percent. The difference is due to the Japanese Yen falling by
approximately 10 percent this year.
As the local currency of an international ETF declines in
value versus the U.S. Dollar it will have a negative affect on
the return of the ETF. Hedged equity ETFs attempt to remove this
affect by initiating short positions in the local currency to
mitigate any currency movements.
Three New Hedged Equity ETFs
db X-trackers MSCI Asia Pacific ex Japan Hedged Equity Fund (
The ETF offers exposure to equities in 12 Asian countries,
excluding Japan. The combination of four developed and eight
emerging countries in the ETF are led by Australia, China, and
South Korea. Unlike a typical Asian ETF, DBAP will take short
positions in select Asia-Pacific currencies to hedge against
fluctuation between the currencies and the U.S. Dollar. The
expense ratio is 0.60 percent.
db X-trackers MSCI Europe Hedged Equity Fund (
The ETF provides investors with a basket of stocks based in
the European Union with heavy exposure to the U.K., France,
Switzerland and Germany. The hedging is accomplished with several
short currency positions, the two largest being the euro and the
British pound. The expense ratio is 0.45 percent.
db X-trackers MSCI United Kingdom Hedged Equity Fund (
With a sole focus on investing in the U.K., this ETF will
attempt to remove all currency fluctuations between the British
Pound and the U.S. dollar. The consumer staples and financials
make up nearly half of the ETF allocation and the top ten
holdings, all large-cap stocks, account for 43 percent of the
ETF. The expense ratio is 0.45 percent.
The new offerings by Deutsche increase the collection of
hedged equity ETFs to eight and investors should not be surprised
to see this area continue to grow with more ETF providers joining
The hedged equity ETF sector has been one of the fastest
growing areas in the last year and that trend should continue as
investors search for new innovative offerings. If the U.S. dollar
starts to rally as the Fed begins to taper, the hedging equity
ETFs could begin to outperform their counterparts in the years
ahead. This is definitely one area to consider when investing
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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