Deutsche Bank is rolling out its db X-trackers MSCI Germany
Hedged Equity Fund (NYSEArca:DBGR) on May 31, but the launch is
really a matter of an existing fund, the db-X MSCI Canada Hedged
Equity Fund (NYSEArca:DBCN), shedding its existing name, index and
ticker and gaining a new ticker, a new index and a new name.
In other words, the debut of the hedged Germany strategy will
also mark the end of the hedged Canada fund DBCN, which has
gathered just $4.3 million since its launch almost two years ago.
It appears to be a fund closure without calling it one, though
technically, it isn't a shutdown, because the fund's CUSIP,
"233051408," won't change.
The nuance behind the rollout of the Germany fund speaks to the
vagaries of currency-hedged investing using
. Many investors have tuned into the virtues of owning a yen-hedged
ETF at a time when Japan's central bank is focused on weakening the
currency, but other currency-hedged strategies, such as the
Canada-focused DBCN, have withered on the vine.
The most successful ETF this year in terms of inflows is the
blockbuster WisdomTree Japan Hedged Equity Fund (NYSEArca:DXJ),
which, almost unbelievably, has become a $10 billion fund by dint
of inflows totaling $7.58 billion and a rise in Japanese
Deutsche Bank's own db X-trackers MSCI Japan Hedged Equity Fund
(NYSEArca:DBJP) has become a $100 million fund for the same reasons
DXJ has taken off.
The Case For DBGR
Additionally, and for different reasons, Deutsche's db
X-trackers MSCI EAFE Hedged Equity Fund (NYSEArca:DBEF) has begun
to gather assets over the past few months, as investors protect
themselves against the possibility of further dollar strength
against the euro. It is now a $76.9 million ETF.
Against that backdrop of possible euro weakness, DBGR is thus
coming to market next Friday.
In the best of all possible worlds, Germany's export-heavy
economy of high-end industrial goods such as cars and heavy
machinery should be uniquely situated to benefit from any euro
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
51 names. It's the same index as the nearly $3 billion iShares MSCI
Germany Index Fund (NYSEArca:EWG), only DBGR takes euro exposure
off the table.
It remains to be seen whether the dollar remains strong against
the euro, particularly because the European Central Bank seems
uninterested in pursuing the ultra-easy monetary policies of the
Bank of Japan.
The Forgotten Funds
It seems all but assured that the new DBGR will gather more than
the $4.3 million its predecessor Canada-focused fund DBCN has.
That said, two other currency-hedged funds that have yet to
gather significant assets stand as examples of investor
selectiveness regarding strategies that aim to protect them from
dollar strength. Investors, after all, have benefited quite a lot
from the dollar weakness that has prevailed since the tech bust in
2000. It seems old habits, and maybe old trends, die hard.
Those two funds, and their still relatively small assets under
management, are as follows:
- db X-trackers MSCI Brazil Hedged Equity Fund (NYSEArca:DBBR),
- db X-trackers MSCI Emerging Markets Hedged Equity Fund
(NYSEArca:DBEM), $8.81 million
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