Deutsche AWM launches the world’s first shorter maturity European high-yield corporate bond ETF

Deutsche Asset & Wealth Management (Deutsche AWM) has listed a suite of three euro-denominated high-yield corporate bond ETFs, including the world’s first ETF providing exposure to the shorter maturity segment of the market.

The db x-trackers II iBoxx EUR High Yield Bond 1-3 UCITS ETF provides exposure to 97 liquid fixed and floating rate sub-investment grade euro-denominated corporate bonds in the one-to-three-year maturity bucket¹. The ETF is listed on the Deutsche Börse and has an all-in fee of 0.35% per annum.

Arne Noack, Head of Exchange Traded Product Development EMEA, commented: “In light of the continued strong demand for high-yield bond ETFs, we have scanned the range of products available in the market and identified certain gaps where we see an opportunity to serve investors. We feel these new products are important additions to the euro high-yield ETF market.”

The yield on the ETF’s underlying index, the Markit iBoxx Liquid EUR High Yield 1-3 Index, stands at 3.96% (as at 07/01/2015).

The other two new launches, also on the Deutsche Börse, provide exposure to euro-denominated high-yield corporate debt encompassing the full yield curve – over 400 securities¹ – and daily rebalanced inverse (or short) exposure on the same index (see table below). The yield on the former’s underlying index, the Markit iBoxx EUR Liquid High Yield Index, stands at 4.31% (as at 07/01/2015). The short daily ETF is specifically aimed at professional investors and provides a tool for tactical inverse positioning. “In launching a product linked to the Markit iBoxx EUR Liquid High Yield Index our intention is to bring to market the most competitively priced ETF tracking the overall liquid universe of the euro-denominated high-yield bond market,” added Noack.

The ongoing low interest rate environment has stimulated interest from investors in higher yielding fixed income exposures, while demand for bond ETFs continues to grow. Assets under management in bond ETFs grew by 41 per cent in 2014².

For more information please contact:
Carlos Cancino
Press contact Deutsche Asset & Wealth Management Nordics
Tel: +-46 768 36 98 73
Email: carlos.cancino@konsensus.se

Erik Rotander
Head of Passive Investment Products Nordics
Deutsche Asset & Wealth Management
Tel: +44 20 7545 3359
Email: erik.rotander@db.com

Product Table

Q&A

Which countries and sectors are the underlying indices most heavily weighted towards?

The db x-trackers II iBoxx EUR High Yield Bond UCITS ETF reflects the performance of 436 bonds from 33 countries¹, with the biggest weightings to France and Luxembourg (each weighted at 17%), followed by Italy, the Netherlands and Germany. By sector, the financial sector has the highest weighting at 23%, followed by consumer goods and industrials (15% each).

The underlying Index for the db x-trackers II iBoxx EUR High Yield Bond 1-3 UCITS ETF currently covers 97 bonds from 19 countries. The largest countries and sectors are the same as for the broader index, although the weightings differ – 36% to financials, 16% to consumer goods and 13% to industrials³. To be included in the indices the bonds must have a minimum €250 million outstanding.

What sort of credit ratings do the underlying companies in these indices have?

Seventy-two percent of the bonds included in the db x-trackers II iBoxx EUR High Yield Bond UCITS ETF are rated ‘BB’, with 25% rated ‘B’³. According to rating agency Standard & Poor’s, ‘BB’ means the company is secure for the foreseeable future but could encounter difficulties if the economy deteriorates. A ‘B’ rating means that difficult economic conditions could have a more detrimental impact⁴.

What are the target investor groups for these new ETFs?

With current prevailing low interest rates, combined with the fact that certain investment groups have requirements to invest in fixed income, demand for high-yield corporate bond exposure should be high. The ETF tracking the 1-3 year maturity segment of the market may be of interest to investors seeking to minimize their investment’s sensitivity to interest rates. Meanwhile, sophisticated investors may find short daily bond ETFs useful for short-term hedging against price corrections.

¹ Source: Markit Ltd, as at 31/12/14

² Source: Deutsche Bank Research, 24 December 2014 (http://etf.deutscheawm.com/DEU/DEU/Download/Research-Europe/87637232-cb97-42a1-892b-8bb1045ff910/European-Weekly-ETF-Market-Review.pdf)

³Source: Markit Ltd, as at 11/12/14

⁴ Source: Standard & Poor’s (http://www.standardandpoors.com/ratings/definitions-and-faqs/en/us)

Deutsche Asset & Wealth Management

With EUR 1 trillion of assets under management (as of September 30, 2014), Deutsche Asset & Wealth Management¹ is one of the world's leading investment organizations. Deutsche Asset & Wealth Management offers individuals and institutions traditional and alternative investments across all major asset classes.

It also provides tailored wealth management solutions and private banking services to high-net-worth individuals
and family offices.

¹ Deutsche Asset & Wealth Management is the brand name of the Asset & Wealth Management division of the Deutsche Bank Group. The legal entities offering products or services under the Deutsche Asset & Wealth Management brand are listed in contracts, sales materials and other product information documents.

Key risks

Investors should note that the db X-trackers UCITS ETFs are not capital protected or guaranteed and investors should be prepared and able to sustain losses of the capital invested up to a total loss.

Shares in db X-trackers UCITS ETFs which are purchased on the secondary market cannot usually be sold directly back to the relevant fund. Investors must purchase and redeem such shares on the secondary market with the assistance of an intermediary (e.g. a market maker or a stock broker) and may incur fees for doing so (as further described in the applicable prospectus). In addition, investors may pay more than the current net asset value of a share in a db X-trackers UCITS ETF when buying shares on the secondary market, and may receive less than the current net asset value when selling such shares on the secondary market.

Investments in funds involve numerous risks including, among others, general market risks, credit risks, foreign exchange risks, interest rate risks and liquidity risks. The value of an investment in a db X-trackers UCITS ETF may go down as well as up and investors may not get back the full amount of their original investment.

Important Notice. This press release has been prepared solely for information purposes and does not constitute an offer or a recommendation to enter into any transaction. Please refer to the relevant fund’s full prospectus and the latest version of the Key Investor Information Document for more information on Deutsche Bank exchange traded funds. These documents are available free of charge from Deutsche Bank, London Branch. Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin – Federal Financial Supervising Authority) and is regulated by the Financial Conduct Authority for the conduct of investment business in the United Kingdom. The registered address of Deutsche Bank AG, London Branch, is Winchester House, 1 Great Winchester Street, London EC2N 2DB. Any direct or indirect distribution of this document into the United States, Canada or Japan, or to U.S. persons or U.S. residents, is prohibited.

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