New Currency-Hedged ETFs Slow Out Of Gate

March 06, 2014

The Japan Story

But investors have caught on to Japan, though it might be more about returns than with isolating investment variables.

DXJ’s considerably smaller competitor, the $447.7 million db-X MSCI Japan Currency Hedged Fund (DBJP | C-55), didn’t fare too badly either, gathering $316.5 million in new assets last year.

Year-to-date, DXJ has added $258.1 million to its coffers, and DBJP has taken in $129.8 million.

Both funds focus on Japan’s growth story, fueled by Prime Minister Shinzo Abe’s policies—dubbed “Abenomics.” Investing in Japanese stocks paid off in a big way in 2013 as the Nikkei 225 Index surged 57 percent on the back of a plunging yen.

DBJP gained 46.6 percent and DXJ was up 37.3 percent in 2013.

By comparison, the non-hedged iShares MSCI Japan ETF (EWJ | B-97) returned 24.7 percent last year—respectable, but still quite a bit less than DBJP or DXJ, which both benefited from the currency-related tailwind.

DXJ_Vs._DBJP_2013_Performance

Chart courtesy of StockCharts.com

No DXJ And DBJP Redux

However, the newly launched HEWJ, a currency-hedged version of iShares’ $13.9 billion iShares MSCI Japan ETF (EWJ | B-97), is only managing some $2.4 million since it launched on Jan. 31. The fund is up 4.6 percent year-to-date.

Other new hedged ETFs from iShares, including the Germany-focused HEWG and the EAFE-index-focused HEFA, have also been slow out of the gates gathering assets. HEWG and HEFA, as noted, are currently managing $2.4 million and $2.5 million, respectively.

“What’s crazy now is that there are more Germany-hedged ETFs than nonhedged ETFs,” noted Hudachek. “In the past, the iShares MSCI Germany ETF (EWG | A-97) was the main play for Germany, but now you have three, so how do you pick between them?”

HEWG joins the incumbents db-X MSCI Germany Currency Hedged Equity Fund (DBGR | B-50) and WisdomTree Germany Hedged Equity ETF (DXGE) in a growing field of German-focused currency-hedged ETFs.

DB Asset Inflows? Nein!

But iShares wasn’t the lone issuer coming to market last month. Deutsche Bank also launched three hedged ETFs: DBKO, DBMX and DBAW.

The three funds launched on Jan. 23 and to date, the South Korea-focused DBKO and MSCI All World-focused DBAW each have $4.9 million in assets, and DBMX, targeting Mexican stocks with a currency hedge, is currently managing $4.6 million.

DBKO joins the WisdomTree Korea Hedged Equity ETF (DXKW) as another early hedged ETF focusing on South Korea.

DBMX is the first ETF to challenge iShares’ blockbuster $2.4 billion iShares MSCI Mexico Investable Market fund (EWW | B-94) in the Mexico Total Market segment, which has been a single-fund segment since 1996, according to an ETF.com analyst report.

 

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