XEWE ETF: Comprehensive Guide to Performance and Insights

The XEWE ETF, formally known as the Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF, is a significant player in exchange-traded funds (ETFs). This fund is designed to mirror the performance of the MSCI Emerging Markets ESG Leaders Index, which aims to provide exposure to companies with exemplary environmental, social, and governance (ESG) practices within emerging markets.

In this article, we’ll dive deep into the XEWE ETF, examining its intraday and historical performance, comparing it with its peers, and exploring its unique aspects to understand this investment vehicle thoroughly.

Understanding XEWE ETF

XEWE is an ETF that offers investors exposure to a basket of stocks from emerging markets, specifically focusing on companies with high ESG ratings. These ratings are based on how well companies manage ESG risks and opportunities relative to their peers. Xtrackers, a division of DWS Group, a well-known asset management firm, manages the fund.

Intraday Performance

Intraday performance refers to the price movements of the ETF within a single trading day. Monitoring this can give investors an idea of the fund’s liquidity and volatility. The XEWE ETF has shown a relatively stable intraday trading pattern. For instance, on June 25, 2024, it opened at $48.12, fluctuated between $47.98 and $48.22, and closed at $48.10.

This narrow trading range suggests that the XEWE ETF is not highly volatile. The trading volume was relatively low, averaging around 50,000 shares per hour. This indicates that while the fund is stable, it may not be as liquid as other ETFs with higher trading volumes.

Historical Performance

When analyzing an ETF, it’s crucial to look at its historical performance to understand how it has fared over time. Over the past year, the XEWE ETF has returned approximately 8.5%. This performance aligns with the broader emerging markets equity market, as represented by the MSCI Emerging Markets Index, which returned around 9% over the same period.

Since its inception in 2018, the XEWE ETF has generated an annualized return of around 6.5%. This is slightly lower than the broader emerging markets index, which returned approximately 7.5% during the same period. This underperformance can be attributed to the XEWE ETF’s ESG focus, which may result in a different sector and country allocation compared to a traditional emerging markets index.

Comparison to Peers

To get a complete picture, comparing the XEWE ETF to other similar funds is essential. One of its main competitors is the iShares MSCI EM ESG Optimized ETF (ESGE). Both funds track MSCI-based emerging markets ESG indices, but the ESGE fund has a slightly different methodology and sector allocation. Over the past year, the ESGE fund returned around 7%, slightly underperforming the XEWE ETF.

Another comparison is with the Vanguard FTSE Emerging Markets ETF (VWO), a broader emerging markets index fund without a specific ESG focus. The VWO fund returned approximately 8% over the past year, outperforming the XEWE ETF by a small margin. This suggests that while the XEWE ETF’s ESG-focused approach provides exposure to companies with high ESG ratings, it may sometimes lag behind broader market indices.

Factors Influencing Performance

The performance of the XEWE ETF, like any other investment, is influenced by various factors:

Market Conditions: Emerging markets can be volatile and are influenced by global economic conditions, trade policies, and political stability.

ESG Ratings: Companies with high ESG ratings may outperform during periods of increased focus on sustainable investing. Conversely, they may underperform if the broader market prioritizes other factors.

Sector Allocation: The XEWE ETF may have a different sector allocation than traditional emerging market indices. For example, it might be underweight in sectors like energy or materials, impacting performance during certain market cycles.

Country Exposure: The fund’s country allocation also affects its performance. Emerging markets are diverse, and the economic conditions of individual countries can vary significantly.

Benefits of Investing in XEWE ETF

Investing in the XEWE ETF offers several benefits:

ESG Focus: For investors who prioritize sustainability and ethical considerations, the XEWE ETF provides exposure to companies with high ESG ratings.

Diversification: The ETF offers diversified exposure to emerging markets, reducing the risk of investing in individual stocks.

Professional Management: The fund is managed by experienced professionals who actively monitor the underlying index and make necessary adjustments.

Potential for Growth: Emerging markets have higher growth potential than developed markets, which can translate into higher returns for investors.

Challenges and Risks

Despite its benefits, investing in the XEWE ETF comes with certain risks:

Market Volatility: Emerging markets can be more volatile than developed markets, leading to significant price fluctuations.

Liquidity Risk: The XEWE ETF’s relatively low trading volume can result in liquidity risk, making it harder to buy or sell large positions without impacting the price.

Currency Risk: Since the fund invests in emerging markets, currency fluctuations can affect returns.

Regulatory Risks: Regulation changes in both emerging markets and the investor’s home country can impact the fund’s performance.

Conclusion

The XEWE ETF is a compelling investment option for those seeking exposure to companies with high ESG ratings in emerging markets. Its performance has aligned with broader emerging market indices and has held up well compared to its ESG-focused peers. However, investors should be mindful of the fund’s volatility, liquidity, and the potential risks associated with investing in emerging markets. You can also know about post touchdown attempt by going through that blog.

FAQs

What is the XEWE ETF?

The XEWE ETF, or the Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF, is an exchange-traded fund that tracks the performance of the MSCI Emerging Markets ESG Leaders Index. This index includes companies with high ESG ratings within emerging markets.

How has the XEWE ETF performed historically?

Over the past year, it has returned approximately 8.5%. Since its inception in 2018, it has generated an annualized return of around 6.5%.

What are the benefits of investing in the XEWE ETF?

The XEWE ETF offers exposure to companies with high ESG ratings, diversified access to emerging markets, professional management, and the potential for higher growth compared to developed markets.

What are the risks associated with the XEWE ETF?

The main risks include market volatility, liquidity, currency, and regulatory risks, all of which can impact the fund’s performance.

How does the XEWE ETF compare to its peers?

The XEWE ETF has performed well compared to its ESG-focused peers, like the iShares MSCI EM ESG Optimized ETF (ESGE), but slightly underperformed broader emerging markets funds like the Vanguard FTSE Emerging Markets ETF (VWO).