While the eurozone is still struggling with high joblessness and shrinking economies, Germany, the European Monetary Union’s largest economy, continues to amaze by remaining competitive and notching up respectable growth quarter-on-quarter.
Exports, which contribute more than 50 percent of German economic output, is likely to benefit further going forward from a broader global recovery.
WisdomTree, the New York-based exchange-traded fund issuer known for its line-up of currency-hedged products, has decided to leverage the German growth story through the launch of the Germany Hedged Equity Fund (DXGE). The fund employs hedging strategies to mitigate the risk of unpredictable currency movements that tend to affect returns.
Germany’s exports grew 1.7 times between 2000 and 2008 despite a rising euro, underlining the economy’s competitiveness since a stronger currency makes exports more expensive to foreigners.
However, between 2008 and September 2013 when the euro started to decline, the country’s exports as a percentage of GDP grew from 42 percent to 52 percent, illustrating how a weak currency can stimulate the German export juggernaut. Hence it makes sense to isolate the performance of German equities from the performance of the euro, reducing the element of currency risk from the portfolio’s performance.
DXGE will track the WisdomTree Germany Hedged Equity Index, a gauge consisting of dividend-paying Germany-incorporated companies which have a minimum market-capitalization of $1 billion and derive less than 80 percent of their revenues from Germany, an approach similar to its top asset-gathering ETF this year, the WisdomTree Japan Hedged Equity Fund (DXJ).
The index has 69 companies in its basket with multinationals like Daimler, Deutsche Telekom, Siemens, BMW, Bayer and Allianz occupying the top slots. Sector wise, consumer discretionary (23.70 percent), industrials (17.18 percent), Financials (14.37 percent) and materials (10.86 percent), receive double-digit allocations.
Large capitalization companies (market cap > $10 billion) contribute nearly 81 percent of index weight while mid cap companies (≥ $2 billion and ≤ 10 billion) contribute about 18 percent. The index has a dividend yield of 3.35 percent and a P/E multiple of 17.32.
The fund has an expense ratio of 0.48 percent.
Disclosure: No holdings
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