Rounding out its line of hedged-equity exchange traded funds, Deutsche Asset & Wealth Management is working on a euro-hedged ETF based on European Monetary Union members.
According to a Securities and Exchange Commission filing, the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ) will track the MSCI EMU IMI US Dollar Hedged Index. DBEZ will have a 0.45% expense ratio.
The new offering is not to be confused with the fund providers’ original Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU), which has a 0.45% expense ratio and garnered $588.2 million in assets under management.
While both Europe ETFs will hedge against currency risks, notably a depreciating euro currency or a strengthening U.S. dollar through the use of forward currency contracts, DBEZ will only track Eurozone stocks. Consequently, the new ETF could provide investors with a more pure exposure to Eurozone equities, without the uncertainties associated with the Foreign Exchange market. [Ahead of ECB Meeting, Hedge Euro ETF Back in the Spotlight]
“The Underlying Index is composed of equities from countries in the EMU, or the ‘Eurozone,’ that have adopted the euro as their common currency and sole legal tender,” according to the filing.
DBEZ held 682 securities from Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal and Spain, with a heavy emphasis on issuers from France and Germany, as of November 5, 2014. In contrast, DBEU includes a 28.4% exposure to the United Kingdom and a 14.8% position in Switzerland.
Year-to-date, the Swiss franc has depreciated 7.5% against the USD, the British Pound is down 5.2% against the greenback and the euro weakened 9.4% against the dollar. Europe equity investors who have not hedged their exposure to currency risks would have generated a lower U.S.-dollar-denominated return as these currencies depreciated against the greenback.
Given its focus on Eurozone markets, DBEZ will likely compete with the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ), which also only targets companies located in Eurozone states. HEDJ is up 6.3% year-to-date. [Currency Hedged ETFs for Exploiting ECB Easing]
For more information on new fund products, visit our new ETFs category.
Max Chen contributed to this article.