DWS introduces EUR-hedged share class for “core” Xtrackers MSCI USA ETF

May 8th, 2018 | By | Category: Equities

DWS Group, the asset manager recently spun out of Deutsche Bank, has introduced a euro-hedged version of its core US equity ETF on Xetra. The newly listed Xtrackers MSCI USA UCITS ETF 2C – EUR Hedged (XD9E GR) share class offers euro-referenced investors currency-hedged equity exposure to large and medium-sized US companies.

DWS introduces EUR-hedged share class of core Xtrackers MSCI USA ETF

DWS introduces EUR-hedged share class of core Xtrackers MSCI USA ETF

The ETF tracks the MSCI Total Return Net USA Index, which covers approximately 85% of the free float-adjusted equity market capitalisation in the US while seeking to minimise foreign currency fluctuations at share class level. The index is currently composed of 631 shares (as of April month-end 2018).

The index follows MSCI’s Global Investable Market Indexes (GIMI) methodology to construct the index, which compares companies across a range of size, sector and style segments. The methodology places a strong emphasis on index liquidity, invisibility and replicability. The index—which is reviewed and rebalanced at least quarterly—is calculated on a total return net basis, which means that all dividends and distributions by the companies are reinvested in the shares after tax.

Companies in the index are weighted by market capitalisation, with Apple (3.6%), Microsoft (2.9%) and Amazon (2.7%) currently taking up the largest individual holdings. The index is currently highly exposed to the information technology sector which commands 25.1% of the index weight, followed by financials with 14.5% and health care with 13.4%.

DWS uses forwards to reduce the effect of currency fluctuations between the currency of its assets (USD) and the currency of the share class (EUR). A tolerance level is applied to ensure that no under-hedged position falls short of 95% of the portion of the NAV of the share class, and that no over-hedged position exceeds 105% of NAV. All costs relating to the forward transactions accrue solely to the currency-hedged share class.

XD9E has a total expense ratio (TER) of 0.12%. The master fund has assets under management of around $3.9 billion. The original unhedged version of the fund—the Xtrackers MSCI USA UCITS ETF—was originally launched in May 2014 and trades in euros, pounds sterling and US dollars. The unhedged share class comes in slightly cheaper with a TER of 0.07%.

DWS also offers the Xtrackers S&P 500 UCITS ETF (XSPX LN) as an alternative option for US equity exposure. The fund has a TER of 0.15% and around $2.5bn in AUM.

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