As the European Central Bank implements looser monetary policies to stimulate a faltering economy, investors can utilize an Europe hedged-equity exchange traded fund to capture the recovery and diminish the negative effects of a depreciating euro currency.
On the upcoming webcast, Currency Hedging Strategies, Britta Weidenbach, managing director at Deutsche Asset and Wealth Management, Dr. Michael D. McNiven, managing director and portfolio manager at Cumberland Advisors, and Jack Fowler, ETF regional V.P. at Deutsche Asset and Wealth Management, will discuss how currency protection could provide a more pure European equity exposure by reducing currency risk.
For instance, the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU) can be used in portfolios as a currency hedged alternative to the Vanguard FTSE Europe ETF (NYSEArca: VGK), the largest U.S.-listed Europe ETF. [Euro Trashed: Some Europe ETFs Decked by Outflows]
Currency traders have been jumping into the U.S. dollar and dumping foreign currencies, with the euro currency 8.3% off from its March high against the USD.
As the euro depreciate against the U.S. dollar, the hedged-equity ETF has outperformed its non-hedged peers. While Eurozone markets are still down as a whole, DBEU registered a smaller drop by hedging its currency exposure, falling 5.6% over the past three months, compared to VGK’s 12.1% decline.
Additionally, more investors are flocking to the currency-hedged theme. DBEU has attracted almost $200 million in new assets since the start of the third quarter and has more than doubled in size just this year. In contrast, VGK has shed $2 billion, the most ever, over the past three months.
With the Eurozone economic data showing continued weakness, a rising number of economists predict that the ECB will enact some type of quantitative easing to help promote growth. For instance, Germany, the Eurozone’s largest economy, is experiencing slowing export growth, lower industrial output and a decline in business confidence, The Guardian reports. Further ECB action could help prevent the European Union from falling into a triple-dip recession.
Potential investors should be aware that DBEU includes broad European exposure. The United Kingdom and Switzerland make up a combined 43.2% weight in the ETF’s portfolio.
Financial advisors who are interested in learning more about investing in currency-hedged ETF strategies can register for the Thursday, October 16 webcast here.