WisdomTree has launched the WisdomTree Germany Hedged Equity Fund (DXGE) on the NASDAQ Stock Market, an ETF providing exposure to German equity markets while hedging exposure to the euro.
The fund has an expense ratio of 0.48%.
Germany is the largest economy within the European Monetary Union, comprising approximately 30%. Moreover, German exports constitute a large portion of Germany's economic growth profile, with over 50% of Germany's gross domestic production (GDP) driven by exports. Since the euro started declining in 2008, Germany's exports – as a per cent of GDP – grew from 42% to 52%, illustrating how a weaker euro can provide support to the German export machine.
"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," says Jeremy Schwartz, WisdomTree Director of Research.
One way for US 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.
"We believe DXGE provides investors with a unique way to capitalise on the growth potential of German exporters while hedging exposure to an often volatile and unpredictable currency – the euro," Schwartz says. "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 preemptive action by isolating their German equity exposure.”