The Deutsche X-trackers MSCI Germany Hedged Equity Fund (NYSEArca: DBGR) is an example of that theme. On its way to topping the unhedged iShares MSCI Germany ETF (NYSEArca: EWG), the largest Germany ETF, by over 1,400 basis points this year, DBGR has added $106.5 million of its $159.1 million in AUM. [March Brings More Inflows to These Germany ETFs]
Basset also highlighted the Deutsche X-trackers MSCI South Korea Hedged Equity ETF (NYSEArca: DBKO) as an example of a currency hedge single-country ETF story that has resonated with investors. At the end of 2014, DBKO had just $5 million in AUM. The day before the Bank of Korea lowered interest rates last week, DBKO had $64 million in assets, but that number has more than tripled to $200.4 million.
Currency hedged ETFs are not done growing. Not if this is a typical strong dollar cycle. Dollar bull markets can last up to eight years, sometimes longer, meaning the current dollar bull cycle is not even half over.
“We’re still early in a strong dollar cycle,” said Bassett. “We’ll continue to see evolution. Four years ago, currency hedged ETFs didn’t even register among international ETFs, now they account for over 8% of international assets. There is scope for much further expansion as investors increasingly turn to currency hedged solutions and go deeper both at the country level and across asset classes.”
Deutsche X-Trackers MSCI Europe Hedged Equity ETF