However, a depreciating euro currency could weigh on overall returns. Europe investments are denominated in the euro, and a weaker EUR translates to a smaller USD-denominated return. The euro has declined 6.2% against the U.S. dollar so far this year and now trades around $1.29.
Kize Behrends, ETF Investment Specialist at Deutsche Bank for the Midwest Region, explained that with a Europe hedged-equity ETF, the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU), investors can access the stock markets of 16 European countries with diminished currency risk. DBEU includes currency forwards to hedge against a group of European currencies.
The ETF includes broad Europe exposure, with securities from Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. Non-Eurozone members, the U.K. and Switzerland, make up 41.8% of the ETF’s portfolio.
In the ETF space, the hedged-equity strategy is relatively new. Some financial advisors have warmed up to the strategy, but further education will be required to help bring these types of investments to a broader audience.
Financial advisors who are interested in learning more about a Europe hedge-equity strategy can listen to the webcast here on demand.