This Hedged Germany Fund Is Proving Popular Amongst Investors

We have seen substantial inflows lately in a growing fund from iShares that debuted a little more than three years ago, and is focused on the German equity market.

HEWG (iShares Currency Hedged MSCI Germany, Expense Ratio 0.53%) has seen more than $225 million in assets enter the fund lately, building its asset base above the $710 million mark presently, and making it the second largest “Germany Equity” fund in the ETF landscape by a comfortable margin above the next largest alternative in the segment, which is FGM (First Trust Germany AlphaDEX, Expense Ratio 0.80%, $145 million in AUM).

EWG (iShares MSCI Germany, Expense Ratio 0.48%) debuted way back in 1996, and has a notable $4.5 billion in assets under management. iShares clearly had EWG in mind when they launched HEWG as a potential tool that hedges out the Euro risk from investing in the German equity market.

iShares is not the only issuer to offer a product in this specific segment, as WisdomTree’s DXGE (WisdomTree Germany Hedged Equity, Expense Ratio 0.48%) and DBGR (Deutsche MSCI Germany Hedged Equity, Expense Ratio 0.45%) are smaller funds with $123 million and $68 million respectively.

The recent popularity of HEWG in terms of inflows has lifted the fund’s daily trading volume on a one-month trailing basis to above 663,000, shares whereas the trailing three month figure is 436,000 shares. The Euro currency itself has had a relatively difficult time against the U.S. Dollar since the end of March, retreating more than 2.6% to present levels in this time frame, so it certainly seems that the buyers in HEWG are comfortable with adding exposure to the German equity market here — but at the same time they are likely hesitant to embrace a falling Euro and the potential effects that may have on overall returns in that market.

Year-to-date, we see Germany trailing the greater European equity market (European Monetary Union members) as measured by EZU (iShares MSCI EMU, Expense Ratio 0.50%) by nearly seventy basis points, so it is possible that recent buyers in HEWG are hoping that the performance gap will narrow. Germany is the second largest weighting market-capitalization wise in EZU at 30% of the portfolio, behind France’s 31% allocation presently.

The iShares Currency Hedged MSCI Germany ETF (NYSE:HEWG) was trading at $27.53 per share on Wednesday afternoon, down $0.06 (-0.22%). Year-to-date, HEWG has gained 6.54%, versus a 4.71% rise in the benchmark S&P 500 index during the same period.

HEWG currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #16 of 91 ETFs in the European Equities ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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