Deutsche Asset Management has launched two strategic beta exchange-traded funds which provide access to US and eurozone equities while using a portfolio optimization process to minimize total volatility.
As of 3 November 2016, Deutsche has 28 strategic beta ETFs within its Europe and Asia-listed UCITS ETF range representing almost €5bn in assets.
The db x-trackers MSCI USA Minimum Volatility UCITS ETF (XMVU) and the db x-trackers MSCI EMU Minimum Volatility UCITS ETF (XMVE) have been listed on the London Stock Exchange and Deutsche Borse respectively. They are the latest in a series of new launches and alterations to the firm’s non capitalization weighted ETF suite as Deutsche seeks to boost its profile as a leading provider of these strategies.
Martin Weithofer, Deutsche Asset Management’s Head of Strategic Beta, commented: “The expansion and evolution of our strategic beta suite of products this year, and the launch of our new minimum volatility ETFs, places us in a strong position to become the leading provider of strategic beta ETFs in Europe.
“We expect the rapid growth in strategic beta investing to continue in the coming years. We’re determined Deutsche will be at the forefront of this important trend.”
The ETFs track MSCI indices which are calculated by optimizing their respective parent indices (the MSCI USA Index and the MSCI EMU Index) in US Dollars for the lowest absolute risk within a given set of constraints. Historically, each index has shown lower beta and volatility characteristics relative to its parent index.
As of 10 November 2016, the largest sector exposures within the MSCI USA Minimum Volatility Index are healthcare (20.1%), financials (18.7%), information technology (15.8%), consumer staples (14.4%) and utilities (8.3%). It has 176 constituents of which the largest exposure is Johnson & Johnson (1.6%).
The largest country exposures within the MSCI EMU Minimum Volatility Index are France (28.6%), Germany (25.1%), Spain (12.7%), Belgium (8.7%) and the Netherlands (8.4%). The largest sector exposures are to financials (21.2%), consumer staples (16.1%), industrials (13.2%), healthcare (11.4%) and consumer discretionary (10.1%). With 125 constituents, the largest single exposure is to Dutch international retailer Ahold (2.0%).
The ETFs are direct, physical replication funds. XMVU and XMVE have total expense ratios of 0.20% and 0.25% respectively.
The new launches complement existing db x-tracker ETFs providing exposure to MSCI factor indices – specifically to quality, value, momentum and global minimum volatility factors. Earlier this year, Deutsche switched the underlying indices for these funds from those created in-house to those provided by MSCI. According to sources at Deutsche, this was done to boost the profile of the funds by aligning them with one of the world’s leading providers of factor-based indices. As such, Deutsche believes the switch will attract further assets into the fund.
On top of the factor ETFs, the strategic beta range also includes dividend-weighted, equal-weighted, and small-cap-weighted equity exposures. On the fixed income side, the range includes eurozone and emerging markets quality-weighted sovereign exposure, and ETFs targeting ‘yield plus’ sovereign and corporate bond exposure – higher yielding fixed income exposure but still mainly to investment grade bonds.
Deutsche now has 28 strategic beta ETFs within its Europe and Asia-listed UCITS ETF range, across both equity and fixed income products, representing almost €5bn in assets as of 3 November 2016.