Deutsche Bank at the end of the month is adding another currency-hedged equity ETF to its roster, this one focused on German stocks, beating WisdomTree to the punch by launching its Germany-focused strategy first.
The db X-trackers MSCI Germany Hedged Equity Fund (NYSEArca:DBGR) will be the market’s first currency-hedged take on German equities, serving up access to German-listed stocks while neutralizing exposure to currency fluctuations between the euro and the dollar.
DBGR is very similar to the WisdomTree Germany Hedged Equity Fund currently sitting in the regulatory pipeline. Deutsche Bank might be hoping that a first-to-market status will help with its asset-gathering goals, if the experience it has had with its Japan-hedged equity fund “DBJP” is any indication.
Indeed, DBJP has outperformed its WisdomTree counterpart, the now-$10 billion WisdomTree Japan Hedged Equity Fund (DXJ) year-to-date, but DBJP remains a far cry from DXJ’s blockbuster success in terms of total assets. Still, DBJP is now a $90 million fund, built on net creations of $74 million so far this year.
DBGR is not, however, the very first ETF to tap into German equities. The iShares MSCI Germany Index Fund (EWG)—also linked to an MSCI index—has been around since 1996, and has accumulated nearly $3 billion in total assets.
The launch could come at a good time for Germany-listed equities, which struggled earlier this year to shake off the eurozone debt malaise that’s centered on countries like Greece, Spain and Italy, but that have recently turned around. Germany remains one of the leading economies in the region.
EWG’s returns, for instance, struggled to stay in the black for much of the first quarter, but the fund has now gained 10.8 percent in the past month alone, putting year-to-date gains at 6.8 percent.
The performance has come despite net outflows of $1.22 billion since the beginning of the year, according to IndexUniverse’s ETF Flows Tool.
Peeling off the currency exposure from a portfolio of German equities, however, would not amount to very significant gains for U.S. investors.
Unlike exposure to the Japanese yen, for instance, the 12-month rolling impact of the euro versus dollar rate adds an extra percentage point to U.S. investor returns at the moment, according to IndexUniverse’s Currency Impact tool.
Still, the concept is that currency fluctuation can be detrimental to U.S. investors—mainly when the U.S. dollar rises in value—and DBGR addresses that.
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.
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