“DBEU doubled in size in one day earlier this year, which speaks to the ETF’s liquidity,” said Oliver. “People that were knowledgeable about currency exposure knew that, over time, the currency can cancel out returns in non-hedged products.”
DBEF, a currency hedged alternative to the iShares MSCI EAFE ETF (NYSEArc: EFA), is another noteworthy story. Year-to-date, DBEF is up 3.5% while EFA has traded lower. Underscoring the perfect storm scenario highlighted by Oliver, DBEF allocates over 28% of its combined weight to Japan and Australia, homes to flailing currencies, in addition to another combined 28% going to U.K. and Swiss stocks along with solid Eurozone exposure. [Currency Hedged ETFs on the Rise]
DBEF is another currency hedged ETF investors have embraced in a significant fashion. The fund now has $619.2 million in assets thanks to 2014 inflows of $337.1 million. Big moves and inflows to ETFs such as DBEF and DBEU could still be in the earlier innings.
“People want to look for mega-trends and signs really point to a stronger dollar,” according to Oliver.
Deutsche X-trackers MSCI EAFE Hedged Equity ETF
Tom Lydon’s clients own shares of EFA.