Low volatility exchange traded funds have been receiving increased attention and rightfully. U.S.-focused low volatility ETFs across multiple cap spectrums have, at the very least, recently been significantly less bad than their traditionally-weighted broad market equivalents.
International investors can breathe a sigh of relief because there are plenty of ETFs offering access to international equities with similar low volatility benefits to what are found with domestic funds, such as the PowerShares S&P 500 Low Volatility Portfolio (NYSE:SPLV) and the PowerShares S&P MidCap Low Volatility Portfolio (NYSE:XMLV).
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Low Vol FXEU
Already one of the leaders when it comes to international low volatility ETFs, PowerShares, the fourth-largest U.S. ETF sponsor, add of international "low vol" fare earlier this year with the debut of the PowerShares Europe Currency Hedged Low Volatility Portfolio (NYSE:FXEU). As its name implies, the PowerShares Europe Currency Hedged Low Volatility Portfolio comes not only with low volatility perks, but the benefits ofa currency hedge.
Related Link: Buying Currency Hedged Europe ETFs On The Dip
FXEU tracks the S&P Eurozone Low Volatility USD Hedged Index, which is comprised of the 80 least volatile stocks in the S&P Eurozone BMI Index that meet a certain liquidity threshold, according to PowerShares. To be precise, the ETF is currently home to 84 stocks.
Since the index and the ETF are designed to deliver on the low volatility promise, figuring out what countries FXEU is heavy on and which Eurozone members are not represented here is fairly easy. At the end of August, FXEU's underlying index allocated nearly 58 percent of its combined weight to German and French stocks, according to S&P data. Those are the Eurozone's two largest economies.
Additionally, FXEU's index featured a 12.5 percent weight to the Netherlands as of August 31, which equates to an overweight position in Dutch stocks relative to other well-known Europe ETFs. Spain is the only PIIGS country represented in FXEU to any substance with a 12.4 percent weight, while Greece and Portugal are not represented in the fund.
Of course, investors are right to question the efficacy of FXEU's methodology and ponder the rewards of marrying low volatility and currency hedging. Like its U.S.-focused, counterparts, FXEU has been notably less bad than rival funds. Since FXEU debuted in May, it has sharply outperformed some well-known currency hedged and unhedged Europe ETFs. FXEU is down 8 percent since coming to market, a decline that is 530 basis points less bad than two of the largest Eurozone ETFs, one currency hedged and one not.
Investors are warming to FXEU's story. Over the past 90 days, the ETF has added over $167 million in assets, making it not only the top PowerShares ETF in terms of assets added over that span, but one of the most successful new ETFs to come to market this year.
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