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US and China might be dominating the global economy, but when it comes to Europe and the G8, Germany is a force to reckon with. As a highly developed social economy, the German economy accounts for 28% of the eurozone economy, making it the largest national economy in Europe. While it is the fourth-largest economy globally in nominal GDP, it is the most open economy globally with a quota of 84.4% and worth having an investment footprint; in comparison, the US quota rating is 26.7%.
What is the composition of German ETFs?
German ETFs comprise investment assets solely domiciled in Germany and those with significant assets or drawing significant revenues off the German economy. As a result, this list will include exchange-traded funds with substantial exposure to the German economy, essentially all those with Germany as part of its top country weightings.
Top 7 German ETFs
2020 saw the coronavirus push the German economy to the negative for the first time in a decade. However, 2021 saw it recover and grow by 2.7% despite the global supply chain bottlenecks. The Ukraine-Russia war and the ongoing sanctions might slow down this economy given German ties to Russia, but the expectation is for the economy to grow by upwards of 4.3%.
iShares MSCI Germany ETF (EWG)
Price: $28.64
Expense ratio: 0.51%
Dividend yield: 2.90%
EWG chart
iShares MSCI German ETF tracks the MSCI Germany Index, investing at least 80% of its assets in the holdings of the tracked index and other investment assets with similar economic characteristics to the composite index holdings.
The EWG is a non-diversified fund exposing investors to the large-cap and mid-cap segments of the German economy.
EWG ETF is ranked № 18 by US News analysts among 78 of the best miscellaneous region funds for long-term investing.
The top three holdings of this fund are:
- SAP SE – 9.04%
- Siemens AG – 8.49%
- Allianz SE – 7.26%
EWG ETF boasts $1.71 billion in assets under management, with an expense ratio of 0.51%. Except for 2021, the last half a decade has been one of the returns for investors; 5-year returns of 12.09%, 3-year returns of 9.45%, and 1-year returns of -13.92%. For pureplay exposure to the German economy, this is the best option.
Xtrackers MSCI Germany Hedged Equity ETF (DBGR)
Price: $28.54
Expense ratio: 0.09%
Dividend yield: 1.75%
DBGR chart
Xtrackers MSCI Germany Hedged Equity ETF tracks the performance of the MSCI Germany US Dollar Hedged Index, net of fees and expenses. It invests at least 80% of its assets in the holdings of the tracked index and depository receipts representative of the underlying holdings.
The top three holdings of this fund are:
- SAP SE – 8.65%
- Siemens AG – 8.07%
- Allianz SE – 6.99%
The DGBR has meager assets under management than the EWG at $10 million but is a slightly cheaper option to own at an expense ratio of 0.45%. It offers targeted exposure to the German equity market but with a hedge against the green buck, protecting your investment against currency fluctuations. The result is pretty resilient with the ability to withstand market downturn; 5-year returns of 20.54%, 3-year returns of 19.65%, and 1-year returns of -5.33%.
Franklin FTSE Germany ETF (FLGR)
Price: $21.56
Expense ratio: 0.09%
Dividend yield: 3.13%
FLGR chart
Franklin FTSE German ETF tracks the performance of the FTSE German RIC Capped Index, net of expenses, and fees. It invests, under normal conditions, at least 80% of its assets in the holdings of its composite index and depository receipts representative of the underlying holdings, exposing investors to the best German large-cap and mid-cap segments.
The top three holdings of this fund are:
- SAP SE – 9.22%
- Siemens AG – 7.98%
- Allianz SE – 7.06%
The FLGR has $16.2 million in assets under management and is the cheapest exchange-traded fund on this list, with an expense ratio of 0.09%. In 2017, Templeton debuted several single-country ETFs, including the FLGR, and they too the market like a duck to water; 3-year returns of 11.00% and 1-year returns of -13.88%. With more concentration on mid-cap equities, this ETF provides both value and growth to a portfolio by offering stability and upside potentials. In addition, a dividend yield of 3.13% offers regular and consistent income.
First Trust Germany AlphaDEX Fund (FGM)
Price: $45.33
Expense ratio: 0.80%
Annual dividend yield: 1.57%
FGM chart
The First Trust Germany AlphaDEX Fund tracks the performance of the FTSE Germany RIC Capped Index, net of expenses, and fees. FGM invests at least 90% of its total assets in the underlying holdings of its composite index and REITs and ADRs coupled to the underlying holdings. It exposes its investors to equities chosen via the AlphaDex methodology to generate positive alpha, ensuring risk-adjusted returns.
The top three holdings of this fund are:
- Aurubis AG – 5.86%
- Talanx AG – 4.68%
- Porsche Automobil Holding SE Pref – 4.45%
The FGM ETF has $72.1 million in assets under management, with an expense ratio of 0.80%. Except for the past 12 months, utilizing the AlphaDex formula has resulted in consistent returns for investors; 5-year returns of 26.15%, 3-year returns of 11.85%, 1-year returns of -14.82%. In addition, a pretty even weighting provides for a fund free of concentration bias.
Global X DAX Germany ETF (DAX)
Price: $28.55
Expense ratio: 0.20%
Dividend yield: 2.77%
DAX chart
The Global X DAX Germany ETF tracks the performance and yield of the DAX Index, net of expenses, and fees. It invests at least 80% in its underlying index in addition to associated American and global depository receipts, ADRs and GDRs.
The top three holdings of this fund are:
- Linde plc – 9.89%
- SAP SE – 8.66%
- Siemens AG – 8.20%
The DAX fund has $32 million in assets under management, with a relatively low expense ratio of 0.20%. Concentrating on Germany’s mega-cap equities, this fund, despite the underlying index comprising 30 equities, can withstand market downturn and results in consistent returns; 5-year returns of 17.45%, 3-year returns of 15.22%, 1-year returns of -11.70%. However, investors should note that majority of these funds underholding’s are in export, and this fund lacks a currency hedge.
iShares MSCI Germany Small-Cap ETF (EWGS)
Price: $72.23
Expense ratio: 0.59%
Dividend yield: 1.46%
EWGS chart
The iShares MSCI Germany Small-Cap ETF tracks the MSCI Germany Small Cap Index, investing at least 80% in its underlying index and securities that exhibit similar economic characteristics to the guards making up the composite index. It exposes investors to the German small-cap segment, accounting for 70% of this economy’s labor market.
The top three holdings of this fund are:
- Rheinmetall AG – 5.03%
- K+S AG – 3.45%
- Thyssenkrupp AG – 2.77%
The EWGS ETF has $34.6 million in assets under management, with an expense ratio of 0.59%. Unlike other funds on this list, concentrating on the small-cap segment makes this fund a relatively more volatile investment due to the susceptibility of small-capitalization equities to markets blips and corrections. However, its equal weighting and the fact that it operates in a global economic powerhouse that is stable and features a strong GDP result in a fund able to withstand market downturn while providing both value and growth; 5-year returns of 68.34%, 3-year returns of 33.71%, 1-year returns of -10.37%.
Wisdom Tree Germany Hedged Equity Fund (DXGE)
Price: $33.13
Expense ratio: 0.48%
Dividend yield: 2.76%
DXGE chart
Wisdom Tree Germany Hedged Equity Fund tracks the performance and yield of the WisdomTree Germany Hedged Equity Index, net of fees and expenses. It invests at least 80% in its underlying index and securities of like economic characteristics to the composite index under holdings. It exposes investors to the German export segment but with a hedge against currency fluctuations.
The top three holdings of this fund are:
- Allianz SE – 6.94%
- Deutsche Telekom AG – 1.02%
- Bayer AG – 6.34%
The DXGE ETF has $24.7 million in assets under management, with an expense ratio of 0.48%. This fund promises momentum and value for a portfolio by being slightly skewed towards the small-cap segment.
It also screens its securities for consistent dividend payments, ensuring investor returns and significant, consistent income; 5-year returns of 30.19%, 3-year returns of 26.62%, 1-year returns of 2.12%, and a dividend yield of 2.76%. It also utilizes future contracts and currency forwards to neutralize fluctuations in the Euro, making it an excellent play on the German export industry.
Final thoughts
The coronavirus led to a slump in the German economy resulting in a 4.3% contraction, which supply chain bottlenecks ensured that 2021 growth could not drive this economy to pre-pandemic levels.
However, if the Ukraine-Russia conflict does not prolong, in that case, the German economy expects to grow by upwards of 4%, with this upswing being fueled by increased exports, increased private consumption, and corporate investing. The seven ETFs above give investors a way to play this economy as it recovers.
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