WisdomTree launches currency-hedged German equity ETF

Oct 22nd, 2013 | By | Category: Equities

WisdomTree, an exchange-traded fund provider, has further expanded its line-up of currency-hedged ETFs with the launch of the WisdomTree Germany Hedged Equity ETF (DXGE) on the Nasdaq stock market.

WisdomTree launches Germany currency-hedged equity ETF

The newly launched WisdomTree Germany Hedged Equity ETF (DXGE) provides currency-hedged exposure to Germany’s largest exporting companies, companies such as engineering and electronics giant Siemens.

Linked to the WisdomTree Germany Hedged Equity Index, the fund is designed to provide exposure to German equities while mitigating currency risk by hedging the EUR/USD exchange rate.

The index consists of dividend-paying companies incorporated in Germany and traded on German stock exchanges that derive less than 80% of their revenue from sources in Germany.

By excluding companies that derive 80% or more of their revenue from Germany, the index is tilted towards companies with a more significant global revenue base. It currently has 69 constituents, the largest of which being Deutsche Telekom, Daimler, BMW, Siemens and Allianz.

Jeremy Schwartz, WisdomTree Director of Research, said: “Germany is one of the engines of European growth and has proven its resilience amid the European crisis. With the eurozone exiting recession in the second quarter of this year, and developed market growth charting an upward trajectory, we believe Germany’s export-based economy is well positioned to benefit from a broader recovery.”

According to data cited by WisdomTree, Germany is the largest economy within the European Monetary Union, comprising approximately 30% of GDP. Moreover, German exports constitute a large portion of Germany’s economic growth profile, with over 50% of Germany’s GDP driven by exports. Since the euro started declining in 2008, Germany’s exports – as a percent of GDP – grew from 42% to 52%, illustrating how a weaker euro can provide support to the German export machine.

One way for dollar-based investors to isolate the performance of German equities from the performance of the euro is to hedge the currency exposure, thus, mitigating one element of risk.

Schwartz added: “We believe DXGE provides investors with a unique way to capitalize on the growth potential of German exporters while hedging exposure to an often volatile and unpredictable currency – the euro. Due to Germany’s historical tendency to display negative correlations between its equities and the euro, and a recent decline in those correlations, DXGE offers investors a way to take pre-emptive action by isolating their German equity exposure.”

With the launch of the fund, WisdomTree now offers five currency-hedged equity strategies for the developed world:

WisdomTree Japan Hedged Equity ETF (DXJ)
WisdomTree Japan Hedged SmallCap Equity ETF (DXJS)
WisdomTree Europe Hedged Equity ETF (HEDJ)
WisdomTree United Kingdom Hedged Equity ETF (DXPS)
WisdomTree Germany Hedged Equity ETF (DXGE)

The new fund has an expense ratio of 0.48%.

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