Strategies Tempered Global Exposure Xtrackers MSCI EAFE Hedged Equity ETF offers diversification without currency risk. BEST IDEAS: PASSIVE Daniel Sotiroff Xtrackers MSCI EAFE Hedged Equity ETF DBEF This article is adapted from the ETF's Morningstar Global Fund Report dated Dec. 9, 2019. Stats 12/31/2019 Xtrackers MSCI EAFE Hedged Equity ETF DBEF captures a majority of the overseas market while effectively eliminating most of the currency risk attached to foreign stocks. It earns a Morningstar Analyst Rating of Bronze. Morningstar Analyst Rating ´ Morningstar Category Foreign Large Blend Expense Ratio 0.35% Category Average Expense 0.99% 5-Yr Annlzd Return 7.78% 5-Yr % Rank in Cat 40 Morningstar Pillars 12/31/2019 This fund tracks the MSCI EAFE 100% Hedged to USD Index. It holds large- and mid-cap stocks from 21 overseas developed markets and hedges away currency risk. Hedging can eliminate most of the volatility caused by fluctuating foreign-exchange rates. It can also affect the fund's total return over short stretches of time. But foreign-exchange rates tend to move in cycles, so the impact on the fund's long-term total return should be muted. Process Above Avg This fund ranked among the best-performing funds in the foreign large-blend Morningstar Category from its launch in June 2011 through November 2019. Over this period, the dollar appreciated against many foreign currencies, so hedging worked to its advantage and was the key driver of this outstanding track record. The fund's low expense ratio is its biggest advantage and should provide a strong edge. K Daniel Sotiroff is a passive strategies analyst with Morningstar Research Services. $16K Morningstar Develped Mrkts ex-North America 14 12 10 Xtrackers MSCI EAFE Hedged Equity ETF 8 01/2017 01/2018 01/2019 Morningstar Ratings 12/31/2019 Equity Style Map 12/31/2019 Micro Small Mid Large Giant Centroid Mstar Ownership Zone Period Return Investment 01/06/2020 Category Index 11/30/2020 Category Avg. Deep Core Core Core High Value Value Grwth Grwth 12/31/2019 Mstar Risk Mstar Rating 3-Yr Average Below Avg QQQ 5-Yr High Below Avg QQQQQ 10-Yr - - - QQQQQ Overall Rating Top 5 Sectors 12/31/2019 Sectors ■ Fund ❙ Category Average Europe-Developed Japan 20.17 14.74 United Kingdom Australasia 45.64 39.30 4.96 6.99 4.58 6.41 0% Morningstar Q1 2020 13.38 13.16 Asia-Developed 54 Parent Average Growth of 10K 12/31/2019 The MSCI EAFE index weights stocks by market capitalization, an approach that benefits investors by capturing the market's collective opinion of each stock's value while keeping turnover low. Market-cap weighting can be tough to beat because the market tends to do a good job valuing stocks over the long term. Occasionally it will increase the fund's exposure to expensive stocks when investors get excited about an area of the market. But this doesn't undermine its long-term efficacy. The portfolio's solid diversification mitigates the impact of holding the worstperforming names. It owns more than 900 stocks and has only 12% of assets in its 10 largest names. Its regional composition looks modestly different from a typical fund in the category because it excludes emerging-markets stocks. But stocks from these regions account for about 6% of a typical peer's portfolio, so ignoring them shouldn't affect the fund's category-relative performance. People Average 10 24.32 16.36 20 30 40 50