Adding Income to Emerging Markets Trade

Investors looking to bolster their income streams via emerging markets equities have some compelling options in the world of ETFs. That includes the Deutsche X-trackers MSCI Emerging Markets High Dividend Yield Hedged Equity ETF (NYSEArca: HDEE).

As many income-minded investors turn to alternative avenues in search for yields, international markets have become a popular destination, but one should be mindful of potential currency risks associated with overseas exposure. Consequently, investors may look to a currency-hedged dividend exchange traded fund to generate yields while mitigating foreign exchange fluctuations.

HDEE is a currency hedged fund, a trait that could prove advantageous as the U.S. dollar rebounds. After slumping for much of 2017, the U.S. Dollar Index is up nearly 2% since the start of the fourth quarter. Even with the dollar sagging for most of this year, HDEE has generated returns of more than 11%.

Some market observers believe emerging markets assets remain vulnerable to changes in Fed policy. ETFs dedicated to emerging markets bonds and equities have also benefited this year from the surprisingly weak dollar, but fixed income traders believe a December rate hike by the Fed is all but a sure thing, a move that could finally boost the greenback.

“In today’s low-yielding interest rate environment, investors searching for additional sources of income may consider a high-dividend yield approach,” according to Deutsche Asset Management. “High-dividend yielding strategies seek exposure to companies with higher-than-average dividend yields relative to their market-cap-weighted counterparts with the goal of capital preservation and potential long-term capital appreciation. Xtrackers MSCI Emerging Markets High Dividend Yield Hedged Equity ETF seeks to give investors exposure to high-quality international equities across emerging markets countries, and provide an alternative, potentially reliable income stream on a currency-hedged basis.”