Equity: Developed Europe - High Dividend Yield
The launch of HDEZ in August 2015 means there is now competition in the high-yield European equity space. Established fund FDD launched in 2007, and has a stable asset base with a robust
“The two portfolios aren't interchangeable ” secondary trading market. HDEZ has neither, but boasts a lower expense ratio.
The two portfolios aren't interchangeable either. FDD offers reasonably neutral—if somewhat concentrated—exposure to European dividend payers. The fund is heavy on Swiss names and the financial sector. HDEZ shows very little overlap with FDD's holdings. It excludes firms from outside the Eurozone, and is currency hedged, which means it will perform very differently when the euro fluctuates against the US dollar.
HDEZ is still establishing itself (without much success in early days) so it may not be easy to trade until it gathers more of an asset base. (Insight updated 03/28/17)
ETF.com Efficiency Insight
Established fund FDD, from First Trust, has a modest, but stable and respectable asset base, and several years of operating history. The fund tracks well on the median, but isn't
“FDD tracks well on the median, but isn't consistent” consistent—at times it has swung several hundred basis points above or below its index.
Competitor HDEZ, from Deutsche, launched in August 2015, and we are still gathering data for analysis. The new fund undercuts FDD's expense ratio significantly, but the First Trust fund's 8-year head start may be tough to beat.
Both funds make quarterly income distributions, and both have avoided taxable capital gains payouts. (Insight updated 03/28/17)
ETF.com Tradability Insight
FDD sees reasonable liquidity, with average spreads that should be acceptable for long-term investors, but likely not for traders. HDEZ, on the other hand, will not be easy to trade until
“FDD sees reasonable liquidity” investor interest and assets pick up.
Trading in blocks looks about equally feasible for both funds. Creation fees are modest and creations/redemptions should have only small impacts on prices in the underlying basket. (Insight updated 03/28/17)
ETF.com Fit Insight
FDD holds a small basket of 30 names, so it shows significant country and sector deviations from our benchmark. However, there's no single correct approach to high yield equity.
“FDD's take isn't wrong, just different” FDD's take isn't wrong, just different. The fund tilts smaller than our benchmark, with a particular emphasis on Switzerland and the financial sector.
HDEZ tracks an MSCI benchmark that uses the same dividend-seeking methodology as our MSCI benchmark, but with two important distinctions. First, the fund only holds stock from countries in the Eurozone. That excludes firms from the UK and elsewhere, which collectively make up over half the benchmark. Second, HDEZ hedges out exposure to the euro for US dollar-based investors. In effect, the fund makes a very specific bet on high-dividend Eurozone equity, and against the euro. (Insight updated 03/28/17)