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Deutsche Adds Six New International Currency-Hedged ETFs


Addressing the popular demand for foreign investment options, Deustche Asset and Wealth management has expanded its suite of international currency-hedged exchange traded funds to hone in on more targeted slices of the global market.

According to a press release, DeAWM launched six new currency-hedged ETFs, including:

  • Deutsche X-trackers MSCI EAFE Small Cap Hedged Equity ETF (DBES)
  • Deutsche X-trackers MSCI Australia Hedged Equity ETF (DBAU)
  • Deutsche X-trackers MSCI Southern Europe Hedged Equity ETF (DBSE)
  • Deutsche X-trackers MSCI Italy Hedged Equity ETF (DBIT)
  • Deutsche X-trackers MSCI Spain Hedged Equity ETF (DBSP)
  • Deutsche X-trackers Japan JPX-Nikkei 400 Hedged Equity ETF (JPNH)

“As a European-based bank, we have been able to leverage our local insight to offer the most comprehensive suite of currency-hedged international equity ETFs in the US,” Fiona Bassett, Head of Passive in the Americas, said in the press release. “We will continue to strategically expand our suite, providing strategies that meet the demands of investors.

DBES targets the MSCI EAFE Small-Cap U.S. Dollar Hedged Index, which focuses on smaller companies in developed markets of Europe, Australasia and the Far East. Specifically, DBES includes Japan 31.1%, U.K. 21.2%, Germany 5.3%, Australia 5.2%, Switzerland 4.4%, Italy 4.2%, France 4.1%, Singapore 3.9%, Spain 2.4% and Hong Kong 2.1%.  The new ETF will act as the small-cap version to the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (DBEF) , the second most popular ETF of the year by asset flows. [Flows to Currency Hedged ETFs Remain Robust]

DBSE will track the MSCI Southern Europe U.S. Dollar Hedged Index, which has carved out exposure to some peripheral southern Eurozone countries, including 37.9% Italy, 2.4% Portugal and 57.2% Spain.

The country-specific, currency-hedged ETFs are pretty straight forward. DBAU tracks the MSCI Australia U.S. Dollar Hedged Index, which includes Australia exposure but mitigates the exposure to currency fluctuations of the Australian dollar to the USD. DBIT follows the MSCI Italy 24/50 U.S. Dollar Hedged Index, which includes Italian equities and a hedge on the euro currency. DBSP tracks the MSCI Spain 25/50 U.S. Dollar Hedged Index, which includes Spanish equities and diminishes euro currency risks. Lastly, JPNH tracks the JPX-Nikkei 400 Total Return USD Hedged Index, a new benchmark of 400 Japanese equities targeted for their return on equity, cumulative operating profit, quality and capital efficiency while mitigating currency risks of the Japanese yen.

The five ETFs each come with a 0.45% expense ratio.

While holding on to overseas assets, U.S. investors will be exposed to currency fluctuations, which can negatively impact overall returns and add to portfolio risks. If a foreign currency depreciates against the U.S. dollar, the foreign asset will have a lower return when converted back into USD. Consequently, investors seeking a more pure play on the underlying foreign markets can utilize a currency-hedged investment to diminish currency risks.

However, potential investors should keep in mind that while these currency-hedged ETFs may outperform a non-hedged fund if the local currencies depreciate against the USD, a non-hedged fund may outperform the currency-hedged ETFs if the USD weakens against the foreign currencies.

For more information on new fund products, visit our new ETFs category.

Money managers who are looking into constructing their own ETFs may also be interested in attending the second annual ETF Boot Camp in New York next month. Whether you’re an ETF start-up, fund company, broker dealer, pension plan, endowment, private equity firm, fund board independent director, 401k plan provider or ETF industry executive…this conference is designed for you. This one-of-a-kind event will condense everything you need to know about the inner workings of the ETF business into two days.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.