Fri 13 Oct 2006
PowerShares has recently released a new ETF called the G10 Currency Harvest Fund and it trades under the symbol DBV. Their website has a pretty good description of the fund; the fund tracks the Deutsche Bank G10 Currency Harvest Index. Despite tracking a very passive index, the fees are around 0.8% per year, which is not bad, but not low either.
The general strategy is to capture a carry trade without leverage. The index goes long the three highest yielding major currencies and short the three lowest yielding currencies. Right now the index is long the US Dollar, New Zealand, and Australia. It is short the Japanese Yen, the Swedish Krona, and the Swiss Franc.
DBV is not as sophisticated as the Uberman Portfolio Quicksilver has developed, but it’s available to retail investors today via a traditional brokerage account.
This one should be worth watching to see how well it performs, as well as how well it tracks the index. I’m curious if one could beat their performance by simply opening up an account at OANDA and following the index yourself…
October 16th, 2006 at 11:19 pm
Yes, I’m still alive. I’m sorry for not having posted in awhile.
I thought I’d mention the UP makeup for comparison’s sake.
Turns out the 3 currencies I’m short are the same: CHF, JPY and SEK, in that order and in much different weightings (48%, 43%, 9%) than the equal split of the Harvest. As for the long currencies, the UP is much more of a slut. The big purchases are the GBP (by far), EUR and AUD; moderate puchases in NZD and USD; and small purchases of CAD, DKK and NOK.
Of course, the difference is that UP is about maximum yield with minimum volatility. The Harvest Fund is all about the concept that high yield = more attractive and thus a good buy with no view to volatility. The UP should, and does seem, to get the benefit of this rule of thumb by default since it will, by definition, be positive yield. So there should be some upward bias beyond the interest yield if this theory has any truth to it.? But I can say, this fund will be an excellent benchmark to follow and chart along with?UP.
As for doing it cheaper yourself, I’d say probably but that doesn’t take into account the money value of time needed to admin the fund.