Deutsche Bank Tries Flying Solo In US ETF Market

Deutsche Bank is involved with 39 ETPs (Exchange Traded Products) listed for trading in the U.S. marketed under the Invesco PowerShares brand.  Last Thursday (6/9/11), they went solo for the first time in the U.S. by launching five new ETFs under their own db-X brand, bringing their product count to 44.

For U.S. dollar based investors, the performance from an international stock investment is typically determined by adding the return of the stock in its local currency to the percentage change of that currency relative to the U.S. dollar.  In other words, the investment provides you with both stock and currency exposure.

These new db-X ETFs take a different approach by removing the currency part of the equation.  Shareholders will receive only the underlying equity return (minus expenses) while being insulated from any currency related gains or losses.  The result is “currency-hedged” international ETFs.

The db-X ETFs should outperform their non-hedged counterparts whenever the U.S. dollar is gaining strength relative to the underlying currencies.  Whenever the dollar is falling, like most of the past ten years, these new ETFs should underperform a non-hedged equivalent.

• db-X MSCI EAFE Currency-Hedged Equity Fund (DBEF) (overview) has an expense ratio of 0.35%
• db-X MSCI Emerging Markets Currency-Hedged Equity Fund (DBEM) (overview) has an expense ratio of 0.65%
• db-X MSCI Brazil Currency-Hedged Equity Fund (DBBR) (overview) has an expense ratio of 0.60%
• db-X MSCI Canada Currency-Hedged Equity Fund (DBCN) (overview) has an expense ratio of 0.50%
• db-X MSCI Japan Currency-Hedged Equity Fund (DBJP) (overview) has an expense ratio of 0.50%

The new db-X ETF website (www.dbxetf.com) provides good information.  The overview links listed above provide additional links to fact sheets with yield, sector allocations, and holdings-related data.

The prospectus (pdf) covers all five new funds.  The press release (pdf) says the product count is now 49 versus the 44 that I count.  I don't know where the other five are coming from, and I'm not sure they do either, because they only list 39 existing products on the db-funds website.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.