A sound investment process and strong management team underpin Xtrackers MSCI All World exUS Hdg Eq ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and liquidity exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a low liquidity exposure is rooted in stocks with lower trading volumes, limiting managers' flexibility. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

ASML Hld

National Energy Services Reunited

Moelis

Shell PLC

AstraZeneca

Novan

SAP SE

Rogers

TotalEnergies SE

BHP Billiton

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Xtrackers MSCI All World exUS Hdg Eq ETF earns an Above Average Process Pillar rating. The primary contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that correspond generally to the performance, of the MSCI ACWI ex USA US Dollar Hedged Index.  The fund, using a "passive" or indexing investment approach, seeks investment results that correspond generally to the performance, of the underlying index, and which is designed to track the performance of equity securities in developed and emerging stock markets while mitigating exposure to fluctuations between the value of the USD and the currencies of the countries included in the underlying index. It will invest at least 80% of its total assets in component securities of the underlying index. 

 The portfolio has allocations in its top two sectors, financial services and technology, that are similar to the category. The sectors with low exposure compared to category peers are industrials and healthcare, with industrials underweighting the average portfolio by 2.7 percentage points of assets and healthcare similar to the average. The portfolio is positioned across 2,048 holdings and is less top-heavy than peers. Specifically, 11.9% of the portfolio's assets are concentrated within the top 10 fund holdings, compared to the category’s 15.4% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 14% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Xtrackers MSCI All World exUS Hdg Eq ETF's strong team drives the strategy's Above Average People Pillar rating. There are four managers listed on the fund: Shlomo Bassous, Bryan Richards, Patrick Dwyer, Ashif Shaikh. Experience on the team is abundant, with 17 years of average portfolio management experience. Together, they manage a total of 32 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

In the past two years, DWS has been under heavy scrutiny from the SEC and German authorities owing to greenwashing allegations that were initially raised in August 2021 by the firm’s former chief sustainability officer Desiree Fixler. The SEC announced on Sept. 25, 2023, that it has fined DWS USD 19 million for failing to implement procedures to ensure that all investment staff members were following its environmental, social, and governance policies. This relates to funds where ESG factors were analyzed alongside other financially material factors, but where managers retained discretion over ESG outcomes. In addition, the firm was ordered to pay USD 6 million for deficiencies in its anti-money-laundering processes that were uncovered in a separate investigation. The investigation by the German authorities into the firm's ESG disclosures is still ongoing.  
The SEC findings underline that despite strong senior management commitment, it takes a considerable amount of time and resources to embed sustainability across all levels of an organization for firms without a long-standing sustainability heritage. Overconfidence and failure to deal with internal criticism adequately appear to have contributed to DWS' misleading statements on ESG matters. While it's difficult to quantify the financial damage to clients and no misstatements were detected in financial disclosures or prospectuses, we believe the firm’s shortcomings have the potential to adversely affect investor outcomes. Hence, we welcome DWS' efforts to strengthen governance around ESG integration and communicate more conservatively about its ESG capabilities.
Questionable and unsteady leadership has contributed to the DWS' woes. Previous CEO Asoka Woehrmann, who had spearheaded the firm's ESG push, stepped down in June 2022 as a result of the ESG investigations. His credibility had already been harmed following his use of personal email for business purposes and a large payment made to him by a client when he was head of Deutsche Bank's private-client business before being appointed as DWS' CEO in 2018. His successor Stefan Hoops is the firm's sixth CEO in the past 10 years, highlighting the instability in the firm's top leadership. This appointment also shows the continued influence of its parent company, even after the partial IPO in 2018. Hoops has spent most of his career at Deutsche Bank but has no asset-management background.
Despite all these negative headlines and shaky leadership, DWS has managed to remain quite stable in its investment ranks. The firm has also made strides to gain greater independence. For example, since 2020, bonuses have been linked to the firm's own performance rather than to that of the bank as a whole, which supports alignment and talent retention. Variable remuneration takes into account performance of up to five years.
DWS' vast fund lineup covers all asset classes, including passive strategies, which are offered under the Xtrackers brand. Many offerings don't distinguish themselves, but there are genuine areas of strength among active strategies, and fees are competitive across many funds. While the product development process has been streamlined, and although the firm has launched new strategies at a slower pace, lineup turnover remains a concern as a culture of asset-gathering prevails. New offerings are partly related to an expansion of ESG capabilities, but the firm is also building out its thematic equity, multi-asset, alternatives, and exchange-traded fund range. 
At this stage, we continue to believe that DWS' strengths justify a Parent Pillar rating of Average despite several weaknesses in its stewardship practices, but we will closely monitor the company for further disruption.

Average

Parent

Xtrackers MSCI All World ex US Hedged Equity ETF

DBAW tracks an index of large- and mid-cap companies from developed and emerging markets, excluding the US. The fund hedges out its exposure to the underlying currencies, relative to the USD.

Xtrackers MSCI EAFE Hedged Equity ETF

Xtrackers MSCI Emerging Markets Hedged Equity ETF

After a rough 2022, some investors are eying international equities to make up for their losses. Not only are many of the world's most competitive companies trading at bargain-basement prices, but some strategists believe that global stocks are poised to rally.

Invest in International Equities With DBAW, DBEF & DBEM

The U.S. dollar is at its highest level since 2000. According to the IMF, since the start of this year, the dollar has appreciated 22% against the yen, 13% against the euro, and 6% against emerging market currencies.

Consider Currency-Hedged ETFs While the Dollar Is at a Record High

Xtrackers MSCI Europe Hedged Equity ETF

Xtrackers MSCI Eurozone Hedged Equity ETF

Xtrackers MSCI Germany Hedged Equity ETF

Xtrackers MSCI Japan Hedged Equity ETF

Xtrackers MSCI All World ex US High Dividend Yield Equity ETF

Xt EAFE Div Yld Shs

International currency moves will impact investors' foreign equity allocations, but investors can turn to currency-hedged exchange traded fund strategies to mitigate the foreign exchange risks and provide a purer play on the underlying overseas markets. In the upcoming webcast, A Strategy to Thrive in a Strong U.S.

Currency Hedged ETFs Could Help Better Manage Your International Market Exposure

As the U.S. dollar strengthens amid changing central bank monetary policy, global equity investors could find their international market exposures experiencing unintended foreign exchange currency risks. In the upcoming webcast, A Strategy to Thrive in a Strong U.S.

A Strategy to Thrive in a Strong U.S. Dollar Environment

ETF Trends' CEO Tom Lydon discusses the XTrackers MSCI All World ex US-Hedged Equity ETF (DBAW) on this week's ETF of the Week podcast with Chuck Jaffe of the MoneyLife Show. Most advisors have familiarity with the MSCI World Index, which contains some of the largest stocks globally and offers diversification through global exposure.

ETF of the Week: XTrackers MSCI All World ex US-Hedged Equity ETF (DBAW)

In an environment of global inflation and rising interest rates, advisors and investors should be aware of how changes in currency exchange rates can affect their international investments. A recent webcast featuring DWS and 3EDGE and moderated by Tom Lydon, CEO of ETF Trends, discusses short-term and long-term outlooks regarding currency, the currency outlook worldwide [.

The Value and Importance of Currency Hedging in 2022

Currency markets are often overlooked and misunderstood. But as central banks eye new rate changes and inflation proves less transitory than expected, investors would do well to carefully consider how currency exchange rates can impact their international equity allocations.

DWS's Currency Forecast for 2022: Don't Be Caught Off-Guard by Currency Fluctuations

Just when it seems like it was safe to get back into the markets and turn on the risk again, a second wave of Covid-19 cases brought more market uncertainty back.

Diversify & Plan for Uncertainty with Currency Hedging Strategies

A volatile election week only amplifies the case for currency hedging. With the dollar fluxing up and down against its foreign counterparts, it's important for investors to get currency hedging exposure amid all the volatility that's certain to come in an election week.

Don't Forget to Hedge Your Currencies in this Volatile Week

Getting global diversification comes with its benefits by investing in international equities or bonds, but they don't come without their caveats. Investors can minimize the risk of global investing by implementing a currency hedging strategy.

Currency Hedging Could Help Fixed Income Investors

WisdomTree Bloomberg US Dollar Bullish Fund

The U.S. dollar has been a steady performer during the turbulent times of the pandemic, serving as a safe haven for investors amid the uncertainty. However, as yields continue to head south, this could threaten the dollar’s status as a safe haven asset.

Prospect of Negative Rates Could Hurt U.S. Dollar’s Safe Haven Status

If an investor is looking into international markets, one should consider potential currency risks and incorporate a currency-hedged exchange traded fund strategy into a diversified portfolio.

Currency-Hedged ETFs for Strategic International Market Exposure

As international central banks adjust their monetary policies to support further growth in the global economy, investors who are considering foreign market exposure should also look into currency-hedged exchange traded funds that limit potential foreign exchange risks. “Where it’s really, for us, becomes interesting is how that affects currencies, and you know we’ve been really [.

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