Making its debut on 02/20/2007, smart beta exchange traded fund Invesco DB US Dollar Index Bullish ETF (UUP) provides investors broad exposure to the Currency ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $300.19 million, which makes it one of the average sized ETFs in the Currency ETFs. Before fees and expenses, UUP seeks to match the performance of the Deutsche Bank Long USD Currency Portfolio Index – Excess Return.
The Deutsche Bank Long USD Currency Portfolio Index – Excess Return is a rules-based index composed solely of long U.S. Dollar Index futures contracts that trade on the ICE futures exchange.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.70%.
The fund has a 12-month trailing dividend yield of 0.00%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Looking at individual holdings, Nybot Finex United States Dollar Index Future-09-14-2026 (DXU6) accounts for about 99.86% of total assets, followed by Invesco Government & Agency Portfolio (AGPXX) and Cash Collateral.
