“As year-end looms, many investors may start to look at their portfolios with an eye to their taxable gains and losses,” Theresa Brennan, ETF regional vice president at Deutsche Asset & Wealth Management, said. “Losses can have real economic benefits in their own right – specifically, they can be used to offset gains made in other investments, potentially lowering an investor’s overall tax liability if properly managed.”
For instance, ETF investors who want capture potentially more attractive markets overseas may take a look at currency-hedged ETFs to diminish the negative effects of a strengthening U.S. dollar or weaker foreign currencies.
For instance, investors can consider country-specific picks like the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) and Deutsche X-trackers MSCI Germany Hedged Equity Fund (NYSEArca: DBGR), or broader strategies like the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU).
DBJP tracks an MSCI Japan index that hedges against a depreciating Japanese yen currency. The yen-hedged Japan ETF includes a large tilt toward consumer discretionary at 22.0%, with top holdings including automobile manufacturers Toyota Motor 5.9% and Honda Motor 1.8%.
DBGR follows an MSCI Germany index that hedges against a weaker euro currency. Consumer discretionary makes up 21.0% of the ETF’s index with Diamer AG at 7.2% among the fund’s largest holdings. Bayer is the largest component, making up 9.3% of DBGR’s underlying portfolio, and the healthcare sector accounts for 15.0% of the portfolio.
DBEU takes a broader approach, tracking the MSCI Europe US Dollar Hedged Index. The Europe ETF’s top country exposure includes the U.K. 30.0%, France 15.0%, Switzerland 14.5%, Germany 13.9% and Spain 5.1%.
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