VOO and SPY and Good, But DBEU Looks A Lot Better Right Now

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Xtrackers MSCI Europe Hedged Equity ETF (DBEU) returned 20.18% year-to-date despite currency hedging. This outpaced the S&P 500’s 18.7%. DBEU hedges against six European currencies to reduce volatility from dollar fluctuations. The fund yields 2.98% and holds 414 stocks across European financials and industrials. If you’re thinking about retiring or know someone who is, there are three quick questions causing many Americans to realize they can retire earlier than expected. take 5 minutes to learn more here

For investors wishing to mitigate currency fluctuation risk for European market investments, xTrackers MSCI Europe Hedged Equity ETF (NYSE: DBEU) is one of a small few that fit the bill, yet still outpaces the Vanguard’ S&P 500 ETF (NYSE: VOO) and State Street’s S&P 500 ETF (NYSE: SPY).

Currency hedging is a nonexistent issue for US focused funds, since more than 99% of the time, all of the securities are entirely denominated in US dollars.  European ETFs and CEFs may not have it as easy. If all of the securities come from the Eurozone, the likelihood is that the majority of stocks are in Euros, with only UK stocks demonominated in GBP. (Great Britain Pound  Sterling). If the span of coverage includes Scandinavian nations or Switzerland, then Norwegian or Danish Krone, Swedish Krona, and Suisse Francs may also need to be hedged against the US dollar for valuation fluctuations.

Surprisingly, the larger European market ETFs like Vanguard FTSE Europe ETF (VGK) or iShares Core MSCI Europe ETF (IEUR) are unhedged. Much of their earlier gains came from earlier in 2025 when the US dollar experienced an unusual 11% downturn before climbing back up over the summer and fall. It is very likely that had the dollar not exhibited such weakness, that the European market ETFs would not have nearly delivered the robust 30%+ gains exhibited year-to-date.

xTrackers MSCI Europe Hedged Equity ETFOleg Elkov / Shutterstock.com

The unusual steep drop of the US dollar earlier in 2025 triggered the DBEU currency hedge to the benefit of its shareholders.

Although unhedged European market ETFs may boast 30%+ YTD gains for 2025, their intrinsic volatility capacity against the US dollar can cause some investors many sleepless nights, especially given the US dollar’s 2025 trading range. Although DBEU deploys a currency hedge protocol, which limits upside with a collar in exchange for curbed volatility, its 20.18% return YTD still outperforms the S&P 500 tracking VOO’s 18.7% and SPY’s 18.6%.

DBEU is a passively managed ETF designed to track the MSCI Europe US Dollar Hedged Index. Launched in October, 2013, its details are as follows:

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YTD Return 20.18% Yield 2.98% Net Assets $661.8 million Beta 0.62 Average Volume 85,298 shares 52-week range $38.58-$48.64 NAV $47.96 1-Year Return 18.83% # of stocks 414 3-Year Return 14.19% Expense Ratio 0.45% 5-Year Return 12.61%

The top 10 holdings in DBEU are:

ASML Holding - 3.16% Roche Holding AG - 2.09% AstraZeneca PLC - 2.08% HSBC Holdings - 1.91% SAP SE - 1.91% Nestle SA - 1.89% Novartis AG - 1.89% Siemens - 1.58% Shell PLC - 1.56% LVMH Moet Hennessey - 1.37%

DBEU deploys the following currency hedge short positions against US dollar long positions:

EUR - Euro GBP - Great Britain Pound Sterling CHF - Suisse Franc SEK - Swedish Krona DKK - Danish Krone NOK - Norwegian Krone

Managing RiskHasseChr / iStock via Getty Images

Swedish krona are among the Scandinavian currencies included in the DBEU currency hedge protocol.

Morningstar gives DBEU a 4-star rating. It has a 60 rating in the 48-78 Aggressive Risk score, which is low for the category. The DBEU currency hedge protocol is the likely reason for these scores.

By contrast, both VGK and IEUR have an 82 rating in the 79-99 Very Aggressive Risk score.

Other risk management benefits of DBEU include:

Among the benefits US investors enjoyed from investing in DBEU was the hedge against the falling US dollar, which hit its nadir in early April. Additionally, DBEU’s 2.98% dividend yield, which is more than double VOO’s 1.12% yield. With more than half of the S&P 500’s YTD returns coming from the Magnificent 7 AI stocks, fears of an AI bubble have driven significant numbers of investors towards European markets, which contain more diversity and are most heavily weighted in financial and industrial stocks, rather than on AI.

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