HDEF and its emerging markets counterpart, the Deutsche X-trackers MSCI Emerging Markets High Dividend Yield Hedged Equity ETF (NYSEArca: HDEE) track high-dividend-yield indices select companies with dividend yields greater than or equal to 1.3 times the yield of the parent index and screen for quality, including return on equity, earnings variability and debt-to-equity. Additionally, the new funds also utilize forward currency contracts to diminish the negative effects of an appreciating U.S. dollar or weakening foreign currencies over the short-term.
Related: A Surging Smart Beta Idea For Ex-US Exposure
Yield-seeking investors who are turning toward international markets may want to consider a currency-hedged strategy to limit the negative effects of weakening foreign currencies or a strengthening U.S. dollar on their investment. If a foreign currency weakens, a non-hedged foreign equity position would have a lower U.S. dollar-denominated return.
The U.K. And Germany combine for over 47% of HDEF’s weight. France and Australia combine for another 23%. Financial services and consumer discretionary stocks combine for over 40% of the ETF’s sector weight.
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