Deutsche cross-lists two Xtrackers income ETFs on SIX

Apr 5th, 2018 | By | Category: ETF and Index News

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Deutsche Asset Management has cross-listed two income ETFs, the Xtrackers MSCI World High Dividend Yield UCITS ETF (XDWY SW) and Xtrackers iBoxx USD Corporate Bond Yield Plus UCITS ETF (XYLD SW), on SIX Swiss Exchange. The ETFs were both first listed on Xetra in March of this year and are also currently listed on London Stock Exchange.

Deutsche AM cross-lists two ETFs on SIX Swiss Exchange

Deutsche AM cross-lists two ETFs on SIX Swiss Exchange.

Quality dividends

XDWY offers investors exposure to large- and mid-cap dividend paying companies listed globally.

The fund tracks the MSCI World High Dividend Yield Index, which screens the broader MSCI World Index (comprising 23 developed market countries) for high-quality companies offering higher-than-average dividend yields that are both sustainable and consistent.

The index is constructed using a dividend-screening process, which favours securities with a track record of consistent dividend payments and with the ability to sustain dividend payouts into the future. Securities are also screened based on certain “quality” factors such as return on equity, earnings variability, debt to equity, and on recent 12-month price performance. Companies with potentially deteriorating fundamentals are identified as being less likely to maintain dividend payouts and are excluded from the index.

The equity index currently has a dividend yield of 3.9% compared to the 2.4% dividend yield of its parent. It has just under half of its exposure coming from the US (49.1%), followed by Switzerland (9.5%), the UK (7.6%) and Canada (5.7%). It’s sector exposures are weighted towards consumer staples (16.6%), healthcare (14.6%) and financials (13.5%).

The fund has a total expense ratio (TER) of 0.29%.

USD corporate bonds

The fixed income listing, XYLD, tracks the Markit iBoxx USD Corporates 1-20 Yield Plus Index.

The index’s parent universe is the Markit iBoxx USD Corporates Index, an index broadly constituting the US dollar investment-grade corporate bond market for bonds with maturities greater than one year. All bonds in the parent universe are ranked according to their benchmark spreads in descending order, with the methodology selecting the top 33% of bonds for index inclusion.

Bonds are weighted by market value outstanding, with a cap of 2% being applied at the issuer level. Bonds that are subsequently downgraded to below investment grade – so-called ‘fallen angels’ – will remain in the index as long as they do not fall lower than an average BB- rating.

The index is rebalanced quarterly but monitored to comply with the rating and maturity criteria on a monthly basis.

The resulting index is composed of approximately 1,400 bonds and – true to its name – achieves a decent yield pick-up. Currently, it delivers an enhancement of 0.47% versus the broader investment-grade corporate bond index, with similar duration and BBB+ average rating.

Over two-thirds (67.9%) of the bonds in the index are rated BBB with most of the remaining exposure (25.4%) in bonds rated A. As expected, bonds from companies listed in the US make up the majority of the index with a 65.3% exposure. The next largest country exposures are China (5.5%) and the UK (2.4%).

The index has a yield-to-maturity of 4.4% and an effective duration of 6.7 years. Most of the bonds have remaining maturities between 7-10 years (35.1%), 15-25 years (18.6%), 3-5 years (16.1%) and 5-7 years (15.0%).

The fund has a TER of 0.25%.

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