Is Invesco DB US Dollar Index Bullish ETF (UUP) a Strong ETF Right Now?

A smart beta exchange traded fund, the Invesco DB US Dollar Index Bullish ETF (UUP) debuted on 02/20/2007, and offers broad exposure to the Currency ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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 $1.96 billion, this makes it the largest ETF in the Currency ETFs. UUP is managed by Invesco. 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

Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.78% for UUP, making it one of the more expensive products in the space.

It’s 12-month trailing dividend yield comes in at 0%.

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 accounts for about 99.99% of total assets, followed by Invesco Government & Agency Portfolio (AGPXX) and United States Treasury Bill.

The top 10 holdings account for about 199.57% of total assets under management.

Performance and Risk

The ETF has added about 10.59% and was up about 14.35% so far this year and in the past one year (as of 07/22/2022), respectively. UUP has traded between $24.70 and $29.03 during this last 52-week period.

The fund has a beta of -0.15 and standard deviation of 7.01% for the trailing three-year period, which makes UUP a medium risk choice in this particular space. With about 11 holdings, it has more concentrated exposure than peers.

Alternatives

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 K1 ETF (PDBC) tracks N/A. First Trust Global Tactical Commodity Strategy ETF has $4.12 billion in assets, Invesco Optimum Yield Diversified Commodity Stratgy No K1 ETF has $7.82 billion. FTGC has an expense ratio of 0.95% and PDBC charges 0.62%.

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.

Bottom Line

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.

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Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports
 
Invesco Optimum Yield Diversified Commodity Stratgy No K1 ETF (PDBC): ETF Research Reports
 
First Trust Global Tactical Commodity Strategy ETF (FTGC): ETF Research Reports
 
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