Investors considering enhancing their portfolios with targeted exposure to one of the world’s largest economies should consider the Xtrackers MSCI Japan Hedged Equity ETF (DBJP).
DBJP seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI Japan US Dollar Hedged Index. The DBJP Index is designed to track the performance of the Japanese equity market, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and the Japanese yen, according to DWS.
The strategy of DBJP hedging out the currency exposure that an investment in international equities brings is what sets the fund apart from many ETFs in the Japan Equities ETFdb Category. This essentially delivers isolated exposure to the performance of the underlying equities in local prices. The impact of currency appreciation or depreciation can be significant in many cases, especially considering the sometimes meaningful swings in the JPY/USD exchange rate, according to VettaFi.
Investors who expect the U.S. dollar to appreciate relative to the yen might prefer this fund as a way to bet on the performance of Japanese stocks.
Given the relatively narrow country-specific focus of this ETF, DBJP may be most useful to those looking to establish a tactical tilt towards Japan or implement a country rotation strategy. The more broad-based Xtrackers MSCI EAFE Hedged Equity ETF (DBEF) includes exposure to Japanese stocks, as well as other developed equity markets outside of the U.S. DBEF, and is unique from other EAFE ETFs because it hedges out the currency exposure that an investment in international equities entails.
DBJP charges a 45 basis point expense ratio and DBEF charges 35 basis points.
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