The asset-gathering proficiency of currency hedged exchange traded funds this year has been duly noted.
In the first quarter, ETFs and other exchange traded products hauled in a combined $97.2 billion, nearly $27 billion of which went to currency hedged ETFs. To put that number into context, the $26.8 billion investors allocated to currency hedged ETFs in the January through March period more than doubled in just a matter of days. On March 9, year-to-date inflows to currency hedged ETFs were $12 billion. [ETFs Add $36.1B in March]
So it is not surprising that four of the top 10 asset-gathering ETFs this year, including the top two, are currency hedged funds. Nor is it surprising that on a percentage basis, some of these funds have experienced asset growth that can accurately be deemed “exponential.” [Currency Hedged ETF Packs on Assets]
That group includes the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF). Investors have allocated $6.65 billion to DBEF, a currency hedged play on the popular MSCI EAFE Index, this year. Only the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) has seen larger inflows.
DBEF’s asset growth deserves to be put into context. Just over a month ago, we highlighted the ETF as a prime beneficiary of the currency hedge phenomenon. At the time, DBEF had $6 billion in assets under management. [Momentum for Currency Hedged ETFs]
Deutsche Asset & Wealth Management (Deutsche AWM), DBEF’s issuer, trumpets DBEF’s ascent to $8 billion on its homepage, but jump over to DBEF’s hompeage and it is clear that the ETF is home to over $9 billion in assets.
DBEF had $9 billion in AUM as of April 9. Said another way, the ETF’s AUM total surged 50% in a month. In mid-October, DBEF had just over $800 million in assets under management. That number grew to $4.6 billion by the end of February.
The currency hedged advantage is continuing in 2015. Importantly, currency hedged ETFs are showing advisors and investors the advantages of muting currency risk in a strong dollar environment. DBEF is up 15.6% this year. Neither the rival iShares MSCI EAFE ETF (NYSEArca: EFA) nor the Vanguard FTSE Developed Markets ETF (NYSEArca: VEA) are up 9%.
DBEF’s 919 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.
Deutsche X-trackers MSCI EAFE Hedged Equity ETF
Tom Lydon’s clients own shares of EFA and HEDJ.