There were no changes to the suite of DWS models this week, so we’ll look at the Xtrackers Developed ex-US Dynamic FX Hedged Model (TR).
There were no changes to the suite of DWS models this week, so we’ll look at the Xtrackers Developed ex-US Dynamic FX Hedged Model (TR). This model looks at a universe of developed market currency-hedged Xtrackers ETFs and picks out the top three based on relative strength. As we touched on at length in our piece on the developed market momentum environment (click here for more), stability of leadership has been a tailwind for momentum strategies focused on developed markets. This is evident as the model has not made a trade in over five years yet has outperformed its benchmark by over 6% on a five-year annualized basis. At the same time, the currency hedged approach helps to reduce portfolio volatility as the model’s five-year standard deviation is 12.60 versus its benchmark’s, the iShares MSCI EAFE ETF (EFA), standard deviation of 16.23. While the model has slightly underperformed this year due to the weakness of the US Dollar, it has shown consistency over the years in what has been a great environment for developed market momentum strategies.
