International Small-Cap ETFs Deliver Stellar Returns

While U.S. small-cap stocks and the relevant exchange traded funds continue confounding investors this year, international small-cap ETFs are delivering stellar returns. That is true of both developed and emerging markets funds.

Investors looking for a conservative play on ex-US small-caps can consider developed market funds and the Deutsche X-trackers MSCI EAFE Small Cap Hedged Equity ETF (BATS: DBES) should be part of that conversation.

DBES “seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI EAFE Small Cap U.S. Dollar Hedged Index. DBES offers investors purer access to small-cap developed market equities while mitigating exposure to fluctuations between the value of the U.S. dollar and select foreign currencies,” according to Deutsche Asset Management.

In other words, DBES is a currency hedged ETF. That could imply the fund is struggling against the backdrop of a weaker dollar, but the opposite is true. In fact, DBES is up nearly 18% year-to-date. That is more than quadruple the performance offered by the widely followed Russell 2000.