With hedged equity ETFs being one of the fastest growing segments of ETFs by assets, Deutsche Asset & Wealth Management has decided to take advantage of the trend with its launch of three new entries.
The funds track MSCI hedged equity indexes and provide exposure to international equity markets, while also aiming to protect against fluctuations in the value of the U.S. dollar and non-U.S. currencies, according to Martin Kremenstein of Deutsche Asset & Wealth Management Americas.
The overall ETF landscape is also rosy. According to new research from IndexUniverse, a total of $33 billion in net new assets found their way into U.S.-listed ETFs last month. Total U.S.-listed ETF assets ended the quarter at $1.6 trillion, up 3.6% from the previous quarter.
The three new Deutsche Asset & Wealth Management ETFs are listed for trading on the NYSE Arca under the following symbols:
db X-trackers MSCI Asia Pacific ex Japan Hedged Equity Fund (NYSEArca: DBAP)
db X-trackers MSCI Europe Hedged Equity Fund (NYSEArca: DBEU)
db X-trackers MSCI United Kingdom Hedged Equity Fund (NYSEArca: DBUK)
Alex Depetris, portfolio manager and COO of Deutsche Asset & Wealth Management's exchange-traded products business in the Americas, speaks about the launch with Money Management Executive.
Why did you decide to launch these ETFs? What motivated your decision?
Given the success of our other currency hedged equity ETFs-like DBJP-we've seen how responsive investors have been to the idea of a product that protects their returns against fluctuations between the U.S. dollar and international currencies. These new Hedged Equity ETFs provide exposure to important developed and emerging markets where this type of currency hedge may be especially advantageous.
Why is the ETF product line a major growth engine?
ETFs have emerged as one of the most popular investment vehicles for their transparency, relatively lower expense ratios and the opportunities they provide for diversification. Deutsche Asset & Wealth Management is already one of the leading exchange-traded product providers globally, and as we look to increase our business in the U.S., it makes sense for us to devote resources to developing this area.
What makes hedged equity ETFs one of the fastest growing segments of ETFs by assets?
In the declining-dollar environment of the past decade, many investors took for granted the impact of currency fluctuations on their international investments. But for the past year or so, as the dollar has strengthened against many foreign currencies, and in light of ongoing currency volatility, the importance of a currency hedge has come to the forefront. As we saw with the decline of the yen and euro and subsequent success of products like DBJP and DBEF, a currency hedging strategy has become an increasingly important part of many investors' portfolios.
Can you explain the unique properties of the new ETFs you just launched?
* db X-trackers MSCI Asia Pacific ex Japan Hedged Equity Fund: DBAP offers investors exposure to equity securities in developed and emerging stock markets in the Asia Pacific region (excluding Japan), while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and selected non-U.S. currencies. The underlying index consists of issuers from 12 developed and emerging market countries: Australia, China, Hong Kong, India, Indonesia, Malaysia, New Zealand, Singapore, South Korea, the Philippines, Taiwan and Thailand. We also offer the db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP).
* db X-trackers MSCI Europe Hedged Equity Fund: DBEU offers investors exposure to equity securities in developed stock markets in the European Union, by alleviating the instabilities that may arise between the value of the U.S. dollar and selected non-U.S. currencies. The underlying index consists of issuers from the following 16 developed market countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
* db X-trackers MSCI United Kingdom Hedged Equity Fund: DBUK offers investors exposure to the United Kingdom equity markets, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and British pound sterling.
DeAWM has structured a unique product set for investors seeking protection from exposure to currency fluctuations. These Hedged Equity ETFs are traded over the db X-trackers platform and are designed to represent a close approximation of the return that can be achieved by investing in an international index.
What type of popularity/attention have these launches received?
We think we've developed products that are ideal for the current market environment and which provide exposure to important parts of the global equity landscape. Again, we've seen the success and growth of products that take a similar approach to hedging out currency risk.
What type of clients would not benefit from these launches?
Any investor with a diversified portfolio that includes foreign equities faces the impact of currency fluctuations on their returns. Thus, any such investor should consider products with built-in currency hedging mechanisms that protect them against this risk.
Deutsche offers currency hedged exposure to more regions than any other U.S. ETF provider. How have you achieved that status?
Hedged Equity ETFs have been at the core of the db X-trackers platform since we launched our first five such funds in the summer of 2011. With the addition of DBEU, DBUK and DBAP, we now offer eight currency hedged equity funds, more than any other U.S. ETF provider. Collectively, these funds offer exposure to a broad range of the most important developed and emerging global markets.