ETF Investors Embrace a Different Way to Germany

ETF Trends

Investors have not been shy about pulling capital from emerging markets exchange traded funds this year. The January total was $10 billion, though it is reasonable to assume that some of the $22 billion withdrawn from equity ETFs just last week came out of funds tracking developing economies.

After all, nine of the 10 worst non-leveraged ETFs thus far in 2014 are emerging markets ETFs and seven of those funds are single-country funds. That does not mean advisors and investors have lost their appetites for the tactical approach afforded them by country-specific ETFs. [EM ETF Redemptions Surge]

In fact, developed Europe single-country ETFs have proven particularly effective at attracting new assets this year. That group includes familiar names such as the largest U.K., Germany and Spain ETFs. Speaking of Germany ETFs, the db X-trackers MSCI Germany Hedged Equity Fund (DBGR) , on a percentage basis, has been one of 2014’s most impressive asset-gathering ETFs. [Where Some of Those EM Outflows Are Going]

In what serves as additional confirmation that investors looking to tap into Europe’s economic recovery want the advantages of an advanced, steady economy in their portfolios, DBGR has DOUBLED in size this year to almost $40.1 million in assets under management as of Feb. 7, according to Deutsche Bank data.

“People like Germany as an investment story,” said Martin Kremenstein, Head of Passive Asset Management for Deutsche Asset & Wealth Management Americas, in an interview with ETF Trends. “These are high quality companies that export high quality goods and should do well in a global recovery.”

High quality German exporters include DBGR holdings such as Siemens (SI), Daimler, BMW and Volkswagen. Alright, so Volkswagen does not scream “high end” among the world’s major car brands, but remember it is the parent company of Audi, Bentley Porsche and Bugatti, among others.

Increasing the allure of DBGR is Germany’s trade surplus, which reached a record $270 billion last year. In an environment where trade surpluses are prized by global investors, Germany’s own surplus has played part in DBGR’s increased prominence, acknowledges Kremenstein.

Equally as important is DBGR’s currency hedged feature, which positions the ETF to profitably a scenario where German stocks rise even as the euro falls. That as a vital trait to remember because, as Kremenstein notes, there are plenty of analysts that are bullish on European equities but bearish on the common currency.

Rates

View Comments (0)