Deutsche plans four X-trackers interest-rate-hedged fixed-income funds

By Toni Weeks

San Luis Obispo, Calif., Aug. 18 – DBX ETF Trust announced in an N-1A filing with the Securities and Exchange Commission its plans to offer four new exchange-traded funds, each one using a passive investment approach to track the performance of its applicable underlying index.

The four new funds are the Deutsche X-trackers High Yield Corporate Bond - Interest Rate Hedged ETF, Deutsche X-trackers Investment Grade Bond - Interest Rate Hedged ETF, Deutsche X-trackers U.S. Aggregate Bond - Interest Rate Hedged ETF and the Deutsche X-trackers Emerging Markets Bond - Interest Rate Hedged ETF.

The underlying indexes have not yet been named.

With the short positions, the underlying index seeks to mitigate the potential negative impact of rising Treasury interest rates on the performance of a specific class of bonds, conversely limiting the potential positive impact of falling interest rates. The short positions are not intended to mitigate other factors influencing prices, such as credit risk.

The long positions in the index are designed to represent the more liquid universe of the applicable class of bonds.

High-yield ETF

The new high-yield fund will seek investment results that correspond generally to the performance, before fees and expenses, of its underlying index, which will be comprised of long positions in dollar-denominated high-yield corporate bonds and short positions in U.S. Treasury notes or bonds of, in aggregate, a roughly equivalent duration to the high-yield bonds.

Under normal market conditions, the fund will invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in high-yield corporate bonds and at least 80% of its total assets in instruments that comprise the underlying index.

Gary Russell and Tom Bouchard will be the portfolio managers.

Investment-grade ETF

The Deutsche X-trackers Investment Grade Bond – Interest Rate Hedged ETF is identical in investment objective and strategy to its high-yield counterpart except that the underlying index will consist of long positions in dollar-denominated investment-grade corporate bonds and short positions in U.S. Treasury notes or bonds of, in aggregate, approximate equivalent duration to the investment-grade corporate bonds.

Thomas Farina, Alvin Burgos and Kelly Beam will serve as portfolio managers.

High grade, broader portfolio

The Deutsche X-trackers U.S. Aggregate Bond - Interest Rated Hedged ETF will seek the same investment objective, but its underlying index will measure the performance of the total U.S. investment-grade bond market. The index will include long positions in dollar-denominated government-related bonds, corporate bonds and certain mortgage- and asset-backed securities as well as short positions in U.S. Treasury bonds.

Farina and Scott Agi have been named portfolio managers.

Emerging Markets ETF

The emerging markets fund shares a similar investment objective and strategy as the previous three ETFs, but its underlying index is comprised of long positions in dollar-denominated government bonds issued by emerging market countries and short positions in U.S. Treasury notes or bonds.

John Ryan and Rahmila Nadi are the portfolio managers.

Most terms yet to come

All of the funds will trade on the NYSE Arca. The ticker symbols have not yet been set.

Shareholder fees, management fees and total annual fund operating expenses have not yet been determined.

New York-based DBX Advisors LLC, an indirect, wholly owned subsidiary of Deutsche Bank AG, will act as the investment adviser.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.