It may not be the earth-shattering combination that chocolate and peanut butter is, but exchange traded funds issuers are marrying the prominent themes of currency hedging and dividends.
Deutsche Bank's ETF unit, Deutsche Asset & Wealth Management (DAWM), did just that on Wednesday with introduction of four new currency hedged dividend ETFs. Those new funds are the Deutsche X-trackers ACWI ex-U.S. High Dividend Yield Hedged Equity ETF (NYSE: HDAW), Deutsche X-trackers Emerging Markets High Dividend Yield Hedged Equity ETF (NYSE: HDEE), Deutsche X-trackers EAFE High Dividend Yield Hedged Equity ETF (NYSE: HDEF) and the Deutsche X-trackers Eurozone High Dividend Yield Hedged Equity ETF (NYSE: HDEZ).
Thanks to ETFs such as the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSE: DBEF), the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSE: DBEU) and the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSE: DBJP), Deutsche AWM is one of the largest issuers of currency hedged ETFs.
A Closer Look
Earlier this week, Deutsche AWM said it has over $20 billion in U.S. ETF assets and is now one of the top 10 issuers in the world's largest ETF market. Deutsche AWN is the world's fifth-largest ETF sponsor.
The Deutsche X-trackers ACWI ex-U.S. High Dividend Yield Hedged Equity ETF tracks the MSCI ACWI ex USA High Dividend Yield US Dollar Hedged Index, the currency hedged equivalent of the widely followed MSCI ACWI ex USA Index.
The new ETF holds nearly 230 stocks, a third of which are financial services names, according to issuer data. Over a third of HDAW's geographic weight is allocated to the UK, an important trait because after the US, the UK is the second-largest developed markets dividend market and one of a small number of markets that has, in recent years, offered dividend growth on par with the US.
The Deutsche X-trackers Emerging Markets High Dividend Yield Hedged Equity ETF follows the MSCI EM (Emerging Markets) High Dividend Yield US Dollar Hedged Index. That new ETF features an even heavier financial services weight of almost 39 percent, but two other sectors – energy and telecom – also command double-digit weights.
HDEE's country weights are reflective of where reliable dividend growth has come from in the developing world in recent years. Combined, China, South Africa and Taiwan are 62.5 percent of the new ETF's geographic weight.
The Deutsche X-trackers EAFE High Dividend Yield Hedged Equity ETF is the currency hedged dividend answer to the MSCI EAFE Index, perhaps the most widely followed developed markets benchmark. Deutsche AWM is already the dominant issuer of MSCI EAFE currency hedged alternatives by way of the aforementioned DBEF. Only one ETF has added more new assets this year than DBEF.
The Deutsche X-trackers EAFE High Dividend Yield Hedged Equity ETF is truly dominated by British stocks with an over 40 percent to the UK, France and Australia, another potent developed market dividend grower, are the other countries with double-digit allocations in the new ETF.
Deutsche AWM also expands its lineup of dedicated Eurozone ETFs with the Deutsche X-trackers Eurozone High Dividend Yield Hedged Equity ETF, which joins the Deutsche X-trackers MSCI Eurozone Hedged Equity ETF (NYSE: DBEZ) and the Deutsche X-trackers MSCI Germany Hedged Equity ETF (NYSE: DBGR) as the firm's Eurozone ETFs.
HDEZ allocates over a third of its weight to financial services names and it would not be surprising to see the new ETF sport a solid yield thanks to an almost 20 percent utilities weight. Germany and France, the Eurozone's two largest economies, combine for 42.5 percent of HDEZ's geographic weight. Finland, the only Nordic nation that is a Eurozone member, is 18.3 percent of the new ETF's weight.
HDEZ, HDEF and HDAW each charge 0.45 percent per year while HDEE charges 0.65 percent.
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