WisdomTree, begun trading a new Dynamic Currency Hedged International Quality Dividend Growth ETF, the WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Fund (Bats: DHDG), on Thursday, November 03, 2016. Here is a synopsis of the new ETF:
FUND INFORMATION:
| Symbol: DHDG | Exchange: BATS |
| Name: WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Fund | Net Expense Ratio: 0.48% |
FUND OBJECTIVE:
The WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Fund seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Index.
REFERENCE INDEX:
The WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Index consists of dividend-paying paying common stocks with growth characteristics of companies in the industrialized world, excluding Canada and the United States, while at the same time dynamically hedging currency exposure to fluctuations between the value of the applicable foreign currencies and the U.S. dollar.
The Index is generally comprised of the 300 companies in the WisdomTree International Equity Index with the best combined rank of certain growth and quality factors, specifically long-term earnings growth expectations, return on equity and return on assets. The WisdomTree International Equity Index is a fundamentally weighted index that is comprised of dividend-paying companies that pay regular cash dividends. To be eligible for inclusion in the WisdomTree International Equity Index, a company must be incorporated in and lists its shares for trading on one of the major stock exchanges in one of 15 developed European countries (Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, or the United Kingdom), Israel, Japan, Australia, New Zealand, Hong Kong, or Singapore. Currently a significant portion of the Index is comprised of companies organized in the United Kingdom, although this may change from time to time.
To be eligible for inclusion in the Index, a company must meet the following criteria:
(i) payment of at least $5 million in cash dividends on shares of common stock in the annual cycle prior to the annual Index screening date;
(ii) market capitalization of at least $1 billion as of the annual Index screening date;
(iii) an earnings yield that is greater than its dividend yield;
(iv) average daily dollar volume of at least $100,000 for the three months preceding the annual Index screening date; and
(v) trading of at least 250,000 shares per month for each of the six months preceding the Index screening date.
Eligible companies are ranked according to a rules-based calculation based on the following 3 factors, weighted as follows: long-term earnings growth expectations (50%), the historical three-year average return on equity (25%), and the historical 3-year average return on assets (25%). The top 300 ranked companies are selected for inclusion in the Index. Securities are weighted in the Index based on dividends paid over the prior annual cycle.
Companies that pay a greater total dollar amount of dividends are more heavily weighted. To derive a company’s initial Index weight, (i) multiply the U.S. dollar value of the company’s annual gross dividend per share by the number of common shares outstanding for that company (Cash Dividend Factor); (ii) calculate the Cash Dividend Factor for each company; (iii) add together all of the companies’ Cash Dividend Factors; and (iv) divide the company’s Cash Dividend Factor by the sum of all Cash Dividend Factors. The maximum weight of any security in the Index is capped at 5% and the maximum weight of any one sector or country in the Index is capped at 20%; however, security, sector and/or country weights may fluctuate above their specified caps in response to market conditions and/or the application of the volume factor adjustments. If a component security no longer meets applicable trading volume thresholds as of the annual Index screening date, the Index methodology applies a volume factor adjustment to reduce such component security’s weight in the Index and reallocates the reduction in the weight pro rata among the other remaining securities.
The Index dynamically hedges currency fluctuations in the relative value of the applicable foreign currencies against the U.S. dollar, ranging from a 0% to 100% hedge. The Index determines and adjusts the hedge ratios on such foreign currencies on a monthly basis using 3 equally-weighted, quantitative signals: interest rate differentials, momentum, and value.
Interest rate differentials are determined by measuring the difference in interest rates, as implied in one month foreign exchange (FX) forwards, between each currency and the U.S. dollar. Momentum is the relative price momentum of the foreign currency as determined by comparing two moving average signals on the historically observed U.S. dollar spot rates over 10 and 240 business day periods. Value is the relative purchasing power of the foreign currency as determined with reference to the foreign currency spot rate over 20 business days as compared to the latest purchasing power parity (PPP) numbers as published by the Office of Economic Cooperation and Development (OECD). This approach is designed to limit losses related to foreign currencies as such currencies depreciate against the U.S. dollar while participating in gains related to foreign currencies when such currencies appreciate against the U.S. dollar, thereby seeking to have the Fund benefit from such currency movements while reducing the volatility associated with currency returns.
Fund Top Consituents (11/11/16):
| Roche Holding AG | 5.52% |
| Unilever NV | 5.48% |
| British American Tobacco PLC | 5.08% |
| Airbus Group | 3.01% |
| Reckitt Benckiser Group PLC | 2.90% |
| LVMH Moet Hennessy Louis Vuitton SE | 2.89% |
| Novo Nordisk A/S | 2.79% |
| Inditex SA | 2.48% |
| Hennes & Mauritz AB | 2.17% |
| Roche Holding AG | 2.06% |
Fund Sector Weights (11/11/16):
| Industrials | 20.07% |
| Consumer Discretionary | 20.01% |
| Health Care | 17.62% |
| Consumer Staples | 16.97% |
| Information Technology | 8.80% |
| Financials | 4.83% |
| Real Estate | 4.73% |
| Materials | 3.67% |
| Utilities | 2.61% |
Fund Top Country Allocation (11/11/16):
| United Kingdom | 18.62% |
| Switzerland | 12.36% |
| Japan | 11.39% |
| Netherlands | 10.75% |
| France | 6.57% |
| Germany | 5.78% |
| Australia | 5.68% |
| Sweden | 5.65% |
| Hong Kong | 5.58% |
| Spain | 5.48% |
Useful Links:
DHDG Home Page
Category: Equities> International Equities> International Dividends
ETFtrack Comment:
Here is a comment from Jeremy Schwartz, WisdomTree Director of Research:
“Investors often take on too much currency risk when they invest overseas. For those who do not want to make the timing decision themselves, DHDG will help dynamically adjust currency-hedge ratios based on a data-driven, transparent process. Adopting a dynamic approach with WisdomTree moves investors away from subjective calls and into a disciplined, factor-based approach to currency hedging. We believe our factors -carry, value and momentum- have potential to outperform both hedged and unhedged strategies over time by rotating currency hedges with their cycles.”