Deutsche AWM introduces smart beta ETFs on US platform

Dec 1st, 2015 | By | Category: Equities

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Deutsche Asset & Wealth Management (Deutsche AWM), the asset manager behind the Deutsche X-trackers brand of exchange-traded funds, has launched a pair of smart beta ETFs offering exposure to US and international equities. The ETFs are based on academically-proven characteristics that influence the risk and performance of stocks.

Deutsche AWM introduces smart beta ETFs on US platform

Deutsche Bank’s asset management arm has released its first smart beta ETFs on its US platform.

The Deutsche X-trackers Russell 1000 Enhanced Beta ETF (DEUS) and the Deutsche X-trackers FTSE Developed ex US Enhanced Beta ETF (DEEF) are the US platform’s first, broad-based US domestic and unhedged developed international equity ETFs. The funds are intended to serve as a core portfolio allocation and as an alternative to traditional market cap-weighted products.

“We are excited to launch our first suite of enhanced beta ETFs in the US,” said Fiona Bassett, Head of Passive in the Americas. “We believe this new suite complements our expertise and commitment to bringing innovative and relevant investment solutions to market, as we have seen growing investor interest in market factor diversification in addition to traditional sector and country diversification.”

The ETFs track the Russell 1000 Comprehensive Factor Index and the FTSE Developed ex US Comprehensive Factor Index respectively. Both indices weight each stock within their respective universe based on five academically-proven smart beta factors which have historically provided risk-adjusted excess returns over market cap weighted benchmarks.

These factors include: value, seeking to identify undervalued stocks by accounting measures such as cash-flow yield; quality, investing in companies which have historically been profitable and produced stable earnings; momentum, stocks which have risen in price over the past 12 months; volatility, those which have exhibited low price variability in the past; and size, tilting exposure towards smaller companies which have historically outperformed their larger peers.

The FTSE Russell methodology follows a simple, bottom-up approach that scores each stock based on each of the five factor characteristics and multiplies each stock’s starting benchmark weight by the respective score. As a result, stocks exhibiting strong factor characteristics are given higher weights within the multi-factor index.

“Multi-factor indexes have become increasingly popular as important diversification tools. Our new FTSE Russell Comprehensive Factor Indexes draw on the unique expertise of our extensive FTSE Russell global index research team, combining multiple factors in a transparent way to help investors meet their unique objectives,” said Ron Bundy, CEO North America Benchmarks for FTSE Russell. “We are excited to align with Deutsche AWM’s ETFs to offer indexes as the basis for their new ETFs.”

The US ETF carries a 0.25% net expense ratio, while the international fund charges 0.35%. Both have been listed on NYSE Arca.

 

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