Deka partners with Solactive on trio of beta ETFs

Sep 3rd, 2019 | By | Category: Alternatives / Multi-Asset

German investment giant Deka Investment has expanded its passive offering with the launch of three new ETFs on Xetra.

Deka partners with Solactive on beta ETF trio

Deka Investment has partnered with Solactive on the launch of three ‘classic market beta’ ETFs

The funds, which are linked exclusively to indices from Solactive, offer beta exposure to German large-cap equities, intermediate-term US Treasuries, and to short-term euro credit.

The funds are physically replicated, eschew securities lending and come with fees of nine, seven and 15 basis points respectively.

The ETFs mark a shift for Deka, which, until now, has rolled out ETFs linked to major brand name indices, such as those provided by MSCI and Markit iBoxx.

The use of underlyings from low-cost indexer Solactive – known for its willingness to undercut more established rivals – should enable the funds to maintain low fees, something Deka will no doubt be hoping helps to drive asset flows.

The funds

The Deka Germany 30 UCITS ETF (ELFG GR) tracks the Solactive Germany 30 Index, which contains the 30 largest German companies weighted by free-float-adjusted market capitalisation, subject to a cap of 10 per cent. The underlying index is, for all intents and purposes, a generic alternative to the better-known DAX index, bearing a remarkably similar constituent list and risk profile. The key differences being the exclusion of Linde and Beiersdorf in favour of Commerzbank and Deutsche Wohnen.

The Deka US Treasury 7-10 UCITS ETF (ELFE GR) tracks the Solactive US Treasury 7-10 Year Q Series USD PR Index. The underlying index measures the performance of US government bonds with remaining maturities of between seven and 10 years. To be eligible for inclusion, bonds must have a minimum amount outstanding of $250 million, be denominated in US dollars and carry a fixed-rate coupon. Inflation-linked, callable, and floating-rate bonds are excluded.

The Deka Euro Corporates 0-3 Liquid UCITS ETF (ELFF GR) tracks the Solactive Euro Corporates 0-3 year Liquid EUR PR Index. The underlying index is designed to replicate the performance of the short-duration euro-denominated investment-grade corporate bond market. The index includes 90 fixed-coupon, senior bond issues with maturities between three months and three years from four distinct category buckets. The first bucket consists of the 20 largest bonds which are issued by financial corporations and are rated either BBB+, BBB or BBB-. The second bucket comprises the 10 largest bonds which are issued by financial corporations and hold a rating better than BBB+. The third bucket holds the 40 largest bonds issued by non-financial corporations with a rating of BBB+, BBB or BBB-, while the final bucket includes the 20 largest bonds issued by non-financial corporations which are rated above BBB+.

Classic market beta

Commenting on the launch, Timo Pfeiffer, Head of Research at Solactive, said: “Deka’s new pure beta ETFs are a distinct representation of the respective markets, focusing on institutional players in Germany. We are very proud to intensify our relationship with Deka, one of the leading players in the German market, and provide them with the benchmark indices for their new line of ETFs.”

Georg Kayser, Institutional Sales at Deka, added: “Especially when reproducing classic market beta, it is important to offer institutional customers fully transparent and coherent investment solutions; and for the release of the ETFs, Solactive convinced us with its strictly rule-based approach.”

The new funds take Deka’s total ETF line-up to 47.

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