The Invesco DB US Dollar Index Bullish ETF (UUP) made its debut on 02/20/2007, and is a smart beta exchange traded fund that provides broad exposure to the Currency ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $735.28 million, this makes it the largest ETF in the Currency ETFs. UUP is managed by Invesco. UUP, before fees and expenses, 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.
Operating expenses on an annual basis are 0.77% for UUP, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.86%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Nybot Finex United States Dollar Index Future-06-16-2023 accounts for about 98.26% of the fund’s total assets, followed by Invesco Government & Agency Portfolio (AGPXX) and United States Treasury Bill-06-01-2023.
The top 10 holdings account for about 198.71% of total assets under management.
Performance and Risk
Year-to-date, the Invesco DB US Dollar Index Bullish ETF has added roughly 2.88% so far, and it’s up approximately 5.47% over the last 12 months (as of 06/07/2023). UUP has traded between $27.25 and $30.67 in this past 52-week period.
UUP has a beta of -0.16 and standard deviation of 7.30% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 8 holdings, it has more concentrated exposure than peers.
Invesco DB US Dollar Index Bullish ETF is an excellent option for investors seeking to outperform the Currency ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust Global Tactical Commodity Strategy ETF (FTGC) tracks N/A and the Invesco Optimum Yield Diversified Commodity Stratgy No K-1 ETF (PDBC) tracks N/A. First Trust Global Tactical Commodity Strategy ETF has $2.74 billion in assets, Invesco Optimum Yield Diversified Commodity Stratgy No K-1 ETF has $5.03 billion. FTGC has an expense ratio of 0.95% and PDBC charges 0.59%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Currency ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.