Buoyed by rampant monetary easing and compelling valuations, U.S. money managers have been funneling more assets into overseas markets. That movement includes Europe exchange traded funds and in significant fashion.
The first quarter still has one month left, but to this point, investors have allocated $19.3 billion to Europe ETFs, Giles Turner reports for the Wall Street Journal, citing Markit data.
Year-to-date, no ETF has added more assets than the $5.3 billion added by the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ). Just 11 months ago, HEDJ celebrated its entry into the $1 billion in assets under management. Today, the ETF has over $12 billion and its ascent to the status of largest ETF, a crown it will take from the Vanguard FTSE Europe ETF (NYSEArca: VGK), can be measured in days, if not minutes or hours. [This ETF is About to Claim a big Honor]
HEDJ has added about $2.1 billion more in new assets this year than the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG), the next best asset gathering ETF.
Although it is not a dedicated Europe ETF, the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF), features European nations among eight of its top 10 country weights. Those eight countries, including non-Eurozone members the U.K. and Switzerland, combine for over 46% of the ETF’s weight. [Another Currency Hedged ETF Swells in Size]
DBEF’s constituents can hail from 21 countries, including the following: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
Given its current asset-gathering pace, DBEF will double in size this year, marking the second consecutive year the ETF has done so. To be more precise, DBEF has more than tripled in size since mid-December. In mid-October, DBEF had just over $800 million in assets under management. Only three ETFs have added more new assets than DBEF this year. [ETFs That Have Doubled in Size]
In January, European Central Bank President Mario Draghi gave financial markets what they were hoping for when he announced, that the ECB will commence an asset-buying program initially valued at $1.3 trillion.
“According to data from Markit, the impact of the QE announcement was immediate. In the week of Jan. 26th, which followed the announcement, investors poured $3.5 billion into ETFs with European exposure, the strongest week of the year so far,” according to the Journal.
Although the rush to Europe currency hedged ETFs has turned heads, some non-hedged equivalents have also packed on the assets. For example, the SPDR EURO STOXX 50 (NYSEArca: FEZ) has seen $308.4 million worth of 2015 inflows.
FEZ, which tracks the benchmark Euro Stoxx 50 Index, allocates over two thirds of its combined weight to French and German stocks. That highly levers the ETF to the themes of German export growth and French dividend growth, among other positive catalysts. [Dividend Opportunity With the France ETF]
SPDR EURO STOXX 50 Fund
Tom Lydon’s clients own shares of HEDJ.