Deutsche offers ETNs tied to base metals, crude oil; Deutsche, Nuveen ETNs approach $1 billion

By Kenneth Lim

Boston, June 17 - The wave of exchange-traded notes continued on Tuesday as Deutsche Bank AG announced a slew of offerings linked to the prices of base metals and crude oil.

Deutsche offers eight ETNs

Deutsche Bank, with marketing partner Invesco PowerShares Capital Management LLC, said it is offering eight series of exchange-traded notes.

As with other recent Deutsche Bank ETNs, the notes will offer simple tracking structures as well as leveraged strategies on both long and short positions.

The PowerShares DB Base Metals ETNs will be linked to the Deutsche Bank Liquid Commodity Index - Optimum Yield Industrial Metals, which tracks price changes in a basket of aluminum, copper and zinc futures.

The Base Metals Double Short note will trade under the symbol "BOM" on NYSE Arca. The Base Metals Double Long note will trade as "BDD," while the Base Metals Short note will trade under "BOS" and the Base Metals Long note will trade under "BDG."

The PowerShares DB Crude Oil ETNs will be linked to the Deutsche Bank Liquid Commodity Index - Light Crude, which tracks changes in the Nymex light sweet crude oil futures.

The Crude Oil Double Short ETN will trade under "DTO" on NYSE Arca. The Crude Oil Double Long will trade under "DXO," the Crude Oil Short will trade under "SZO" and the Crude Oil Long will trade under "OLO."

The double-short notes will offer exposure to double the inverse performance of the underlying indexes, while the short notes will offer exposure to the inverse performance of the underlying.

Deutsche approaches $300 million

Deutsche Bank has raised "a little under" $300 million in assets under management from exchange-traded notes so far, according to Martin Kremenstein of Deutsche Bank's Global Markets Investment Products group.

"ETNs have a flexible structure which allows us to deliver more difficult-to-access assets and strategies to investors," Kremenstein said in an e-mail.

Deutsche Bank is eyeing a broad range of investors with its ETN offerings, he said.

"We are aiming the products at investors who want to express a view based on the direction of the underlying assets, asset allocators who want to over or underweight specific commodity sectors and traders who are looking to express short-term views," Kremenstein said.

Nuveen also rides ETN wave

Deutsche Bank is not alone in the ETN space. Nuveen Investments, which announced an offering through issuer HSBC on its Elements platform on Monday, has also been aggressively marketing ETNs.

Nuveen, which markets the Elements notes together with Merrill Lynch & Co., has sold close to $550 million to $600 million of Elements so far, Nuveen managing director of structured products Michael Forstl told Prospect News.

The ETN structure offers two key benefits to investors, Forstl explained.

"Number one is the structure itself," he said. "What can you do with an ETN that you can't do with an ETF? ETNs are very good at providing access to hard-to-reach markets and assets like returns tied to commodities. It's a very efficient way to do it with an ETN that you can't really do with a fund.

"ETNs also provide access to proprietary market strategies that have a high level of intellectual property capital [like alpha-seeking strategies]. The ETN structure is more well suited to making that intellectual property accessible to investors."

Unlike most other issuers, Nuveen has chosen to offer its ETN platform under an open-architecture principle, Forstl said.

"An open architecture platform truly allows you to bring the best product to the end user. You get best in class," Forstl said, adding that the firm will turn down issuers that do not meet its due diligence standards. "It's really a best-in-class platform. On the investment content side, we're able to bring a wide theme of investment strategies to the marketplace."

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