Daily ETF Watch: 4 Hedged Hi-Yld Funds Debut

August 12, 2015

Deutsche Bank rolled out four funds today that combine two of the ETF world’s most popular trends. The funds are currency-hedged, and their underlying indexes target stocks that have dividend yields that are at least 1.3 times the dividend yield of the benchmarks from which the high-dividend indexes are derived.

The funds’ indexes also filter the components for things like dividend quality, sustainability and persistency, according to a press release from Deutsche Bank.

The four funds, their tickers and expense ratios are as follows:

  • Deutsche X-trackers MSCI All World ex US High Dividend Yield Hedged Equity ETF (HDAW), 0.45 percent
  • Deutsche X-trackers MSCI Emerging Markets High Dividend Yield Hedged Equity ETF (HDEE), 0.65 percent
  • Deutsche X-trackers MSCI EAFE High Dividend Yield Hedged Equity ETF (HDEF), 0.45 percent
  • Deutsche X-trackers MSCI Eurozone High Dividend Yield Hedged Equity ETF (HDEZ), 0.45 percent

Investors are still income-hungry, as interest rates remain low—that’s been the case for some time. But with the strengthening U.S. dollar, currency hedging has become more of a concern with regard to foreign investments. The four new Deutsche Bank ETFs seek to service both concerns.

WisdomTree Plans 2 Funds

WisdomTree recently filed for two funds covering very different market segments, including a fund that takes advantage of the European recovery and a currency-hedged fund that targets the global real estate market.

Playing The European Recovery
The most remarkable of the pair is undoubtedly the WisdomTree Europe Local Recovery Fund. The index-based ETF is designed to capitalize on the recovery of Europe’s economic recovery by targeting companies that meet a number of criteria.

According to the prospectus, eligible components must generate at least 50 percent of their revenue from within Europe, be traded in euros and be listed on an exchange in Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal or Spain. They must also meet size and liquidity requirements.

Companies classified as consumer staples, health care, telecommunications or utilities are excluded from the index.

The weighting methodology is rather complex: One quarter of the weight is determined by the company’s float-adjusted market capitalization, while the remaining 75 percent is based on the company’s five-year correlation with the European Commission Economic Sentiment Indicator from month to month. Companies with higher correlations get a higher weight.

The European Commission Economic Sentiment Indicator is essentially a confidence measure that combines five different confidence indicators from the industrial, service, consumer, construction and retail trade spaces.

A Global Real Estate Fund
The WisdomTree Global ex-U.S. Hedged Real Estate Fund, on the other hand, falls into a familiar theme for WisdomTree. The ETF provider has been launching quite a few currency-hedged funds, and already has a lineup of 17 such ETFs.

The fund will focus on dividend-paying stocks of real estate operating, real estate development and diversified real estate companies listed in developed and emerging markets other than the U.S. Components must be at least $1 billion in market capitalization, meet certain liquidity thresholds and pay out at least $5 million in cash dividends during a 12-month period, according to the prospectus.

WisdomTree already has the $121 million WisdomTree Global ex-U.S. Real Estate Fund (DRW | B-72), which is basically the unhedged version of the fund described in the filing. The filing, however, does not mention if the currency-hedged fund will be able to invest in its unhedged counterpart.

Neither filing included a ticker or expense ratio.


Contact Heather Bell at [email protected].

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