We spoke about recent upside call activity in the largest EAFE based Equity fund in the U.S. listed marketplace EFA (iShares MSCI EAFE, Expense Ratio 0.34%) in yesterday’s piece, and it is evident that the action is not confined specifically to just EFA or say the second largest fund in the space VEA (Vanguard Europe Pacific, Expense Ratio 0.09%). DBEF (Deutsche MSCI EAFE Currency-Hedged Equity Fund, Expense Ratio 0.35%) is much lesser known than the aforementioned funds, having debuted in mid-2011, but the ETF has impressively raised more than $2.1 billion since inception, and it now averages more than 1.5 million shares traded daily.
DBEF now ranks as the sixth largest fund in the greater “EAFE” category in terms of assets under management, as it has benefitted from a trend of portfolio managers and investors gravitating to funds that “hedge out” exposure to fluctuations in the U.S. Dollar. Specifically, the fund tracks what is known as the MSCI EAFE Dollar Hedged Index.
DBEF is not the only game in town in this Currency Hedged area, as iShares launched HEFA (iShares Currency Hedged MSCI EAFE ETF, Expense Ratio 0.39%) in January of last year, and this fund has managed to attract about $84 million since inception. We also see WisdomTree with an offering here in the greater “EAFE” space that incorporates a Currency Hedged strategy, specifically in IHDG (WisdomTree International Hedged Dividend Growth Fund, Expense Ratio 0.58%) and this fund is even newer than HEFA to the market, having debuted in May of last year.
This fund is also considerably smaller than the previously mentioned funds, with only about $27.8 million in assets under management currently.
“Currency Hedged” funds have been enormously popular with not only institutional investors and ETF model portfolio builders, but also are growing favor among retail investors whom are increasingly conscious about their exposures to fluctuating exchange rates in the currency marketplace.