DBEF has been a popular way for investors to diversify into international developed Europe, Australasia and Far East, or EAFE countries, including Japan 21.8%, United Kingdom 20.7%, France 10.0%, Switzerland 9.5%, Germany 8.8%, Australia 6.5%, Spain 3.6%, Singapore 3.1%, Netherlands 3.0% and Hong Kong 2.8%, among others.
DBEF has been outperforming the benchmark MSCI EAFE Index. Year-to-date, DBEF rose 4.3% while the iShares MSCI EAFE ETF (NYSEArca: EFA), which tracks the non-hedged MSCI EAFE Index, gained 2.0% higher. With the U.S. Dollar Index up 5.0% this year, DBEF may have provided a purer play on the EAFE markets as opposed to the funds that track the unhedged MSCI EAFE Index, which saw returns lowered by weaker currencies.
Looking ahead, while the Federal Reserve may push off on an interest rate hike, the U.S. central bank remains committed to hiking rates by the end of the year, which has many market observers anticipating a December monetary policy change. Consequently, the U.S. dollar may still continue to appreciate against foreign currencies once the Fed tightens its policy.
Financial advisors who are interested in learning more about smart-beta, currency-hedged index strategies can register for the Tuesday, October 12 webcast here.