db x-trackers lists the world’s first ETF on hedge funds

db x-trackers lists the world’s first ETF on hedge funds

Deutsche Bank has launched the world’s first Exchange Traded Fund (ETF) based on actual hedge funds, providing liquid, exchange-tradable access to the hedge fund asset class.

The hedge fund ETF, which is UCITS III compliant, is linked to the db Hedge Fund Index - a proprietary Deutsche Bank index that captures core hedge fund strategies (equity hedge, market neutral, credit and convertible, systematic macro and event driven) in a liquid and transparent format. Each strategy is reflected by a sub-index which is represented in the main index according to recognised industry asset weightings.

Each sub-index is linked to the performance of its constituent hedge funds sourced from Deutsche Bank’s leading hedge fund managed accounts platform. The platform is a risk controlled, liquid and transparent investment platform representing a broad spectrum of hedge fund strategies. The funds on the platform are run by Deutsche Bank entities with external third party hedge fund managers appointed to manage each underlying portfolio.

Stephane Farouze, global head of hedge fund derivatives at Deutsche Bank comments, “The structure of the hedge fund managed account platform means that all the funds in the ETF index are subject to Deutsche Bank’s continuing daily risk monitoring process and that investors also have a higher level of transparency than with traditional hedge fund products. For investors wanting access to hedge fund returns, this ground breaking ETF offers unprecedented transparency and as well as intra day liquidity compared to at best monthly or even quarterly liquidity for a traditional hedge fund investment.”

Thorsten Michalik, head of db x-trackers adds, “This new product again demonstrates Deutsche Bank’s capabilities as the leading innovator in the European ETF space. For the first time, investors will have liquid, UCITS III access to the hedge fund industry. Market participants will also be able to base their financial products on the ETF, as Deutsche Bank will be the market maker and will offer two way prices on and off the stock exchange.”

All hedge funds on the managed account platform are Jersey unit trusts listed on the Irish Stock Exchange and managed and administered by legally separate Deutsche Bank affiliates. Third party hedge fund managers are sub-contracted to each platform fund as a trading advisor and their responsibility is to manage the portfolio for a given fund. The platform is a risk-monitored and transparent framework benefiting from the following:

* Position level data for each fund for Deutsche Bank’s Risk Monitoring group
* Daily Risk Monitoring by Deutsche Bank to ensure each trading advisor complies with the agreed investment guidelines for each fund
* Third party regulatory oversight by the Irish Stock Exchange and the Jersey Financial Services Commission
* Fund pricing independent to the Trading Advisor
* Auditing by KPMG.

The index level of the db Hedge Fund Index is independently calculated on a T + 3 business day DBIQ. The index is calculated on a total return basis and started on 31 December 2008. Index levels are posted on Bloomberg and on the DBIQ website (https://index.db.com/).

The ETF on the db Hedge Fund Index has a management fee of 0.90% p.a., is listed on the Frankfurt Stock Exchange and Euro Hedged. The ETF was listed on the 11 March 2009 in Frankfurt. During the course of 2009 further listings in Europe are planned.

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