Solid first year for Deutsche and SCM Private’s active multi-asset ETF

Mar 5th, 2013 | By | Category: Alternatives / Multi-Asset

The first London-listed actively managed exchange-traded fund-of-funds, the db x-trackers SCM Multi Asset UCITS ETF (XS7M) from Deutsche Asset & Wealth Management, has reached its one-year anniversary, registering solid risk-adjusted performance.

Solid first year for Deutsche and SCM Private’s active multi-asset ETF

Alan Miller, chief investment officer of SCM Private.

The ETF, which provides exposure to a portfolio of exchange-traded products actively managed by SCM Private, a third-party asset manager that specialises in running asset allocation portfolios primarily consisting of ETFs, posted a return of 7.85% with annualised volatility of 7.84% in its debut year.

This compares to a return of 10.91% and volatility of 13.83% for the FTSE 100 Index and a return of 1.78% with volatility of 6.42% for the Markit iBoxx Gilts Overall Index.

The comparable Sharpe ratios, assuming a risk-free rate of 0.50%, are 0.94 for the db x-trackers SCM fund, 0.75 for the FTSE 100, and 0.20 for the iBoxx gilts index. The Sharpe ratio is a commonly used measure of risk-adjusted performance – the higher the Sharpe ratio, the greater the return generated per unit of risk (volatility).

Alan Miller, co-founder and chief investment officer of SCM Private, commented: “Our aim is to generate consistent outperformance on a risk-adjusted basis, and I’m pleased to see that we’re meeting that challenge. Dynamic asset allocation, as opposed to individual stock and bond picking, is gaining in prominence, and as more people migrate towards self-directed investing, we hope many more investors will consider this as an attractive alternative to traditional fund-of-funds, but with significantly lower and more transparent costs.”

The ETF has an ‘all-in’ fee (not including portfolio rebalancing costs) of 0.89% per annum. The majority of Deutsche’s exchange-traded funds (ETFs) and exchange-traded commodities (ETCs) are available for inclusion in the strategy, with selection and weightings determined on at least a monthly basis by SCM Private.

“A benefit of investing in this way is the significant diversification the investor gains. It means investors can, with just a single trade, acquire exposure to over 2,000 shares and bonds from 50 different countries,” added Miller.

The portfolio composition is growth oriented, currently with around 60% exposure to equities and 40% to bonds (emerging market and corporate bonds). Approximately two-thirds of the portfolio is exposed to sterling-denominated assets, with the addition of liquid international currency exposure provided in line with SCM Private’s risk and diversification objectives.

Major holdings within the fund include the db x-trackers FTSE 100 UCITS ETF, the db x-trackers iBoxx GBP Liquid Corporate UCITS ETF, the db x-trackers FTSE All-Share UCITS ETF, the db x-trackers Emerging Markets Liquid Eurobond UCITS ETF and the db x-trackers MSCI Japan Index UCITS ETF.

Manooj Mistry, Deutsche Asset & Wealth Management’s Head of Exchange Traded Products, EMEA, said: “We believe that in future more investors will be looking to managers engaged in active asset allocation to generate ‘alpha’. The db x-trackers SCM Multi Asset UCITS ETF, now with a year of trading behind it, is well placed to serve that need.”

The fund currently has assets of £3.3 million, which is mostly original seed capital. However, given the robust first-year performance, highly credible management team and low fees, the fund is now likely to see increased inflows having built the foundations of a solid track record.

Listed on the London Stock Exchange, the ETF is eligible for inclusion in ISAs and SIPPs, and is exempt from stamp duty.

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