Is Invesco DB US Dollar Index Bullish ETF (UUP) a Strong ETF Right Now?
The Invesco DB US Dollar Index Bullish ETF (UUP) was launched on 02/20/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Currency ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $1.46 billion, which makes it the largest ETF in the Currency ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Deutsche Bank Long USD Currency Portfolio Index - Excess Return.
The Deutsche Bank Long USD Currency Portfolio Index - Excess Return is a rules-based index composed solely of long U.S. Dollar Index futures contracts that trade on the ICE futures exchange.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.77% for UUP, making it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.90%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Looking at individual holdings, Nybot Finex United States Dollar Index Future accounts for about 98.16% of total assets, followed by Invesco Government & Agency Portfolio (AGPXX) and United States Treasury Bill.
Its top 10 holdings account for approximately 198.83% of UUP's total assets under management.
Performance and Risk
The ETF has lost about -1.22% so far this year and is up about 6.36% in the last one year (as of 01/30/2023). In the past 52-week period, it has traded between $25.55 and $30.67.
The fund has a beta of -0.15 and standard deviation of 8.09% for the trailing three-year period, which makes UUP a medium risk choice in this particular space. With about 9 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco DB US Dollar Index Bullish ETF is an excellent option for investors seeking to outperform the Currency ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust Global Tactical Commodity Strategy ETF (FTGC) tracks N/A and the Invesco Optimum Yield Diversified Commodity Stratgy No K-1 ETF (PDBC) tracks N/A. First Trust Global Tactical Commodity Strategy ETF has $3.39 billion in assets, Invesco Optimum Yield Diversified Commodity Stratgy No K-1 ETF has $6.42 billion. FTGC has an expense ratio of 0.95% and PDBC charges 0.62%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Currency ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports
Invesco Optimum Yield Diversified Commodity Stratgy No K-1 ETF (PDBC): ETF Research Reports
First Trust Global Tactical Commodity Strategy ETF (FTGC): ETF Research Reports
