Deutsche Bank has launched two additional exchange-traded funds linked to money market rates, the db x-trackers II Sonia Total Return Index ETF and the db x-trackers II Fed Funds Effective
Deutsche Bank has launched two additional exchange-traded funds linked to money market rates, the db x-trackers II Sonia Total Return Index ETF and the db x-trackers II Fed Funds Effective Rate Total Return Index ETF, reflecting the UK and US short-term money market interest rates of 5.48 per cent (Sterling Overnight Index Average, or Sonia) and 3.47 per cent (Fed Funds Effective Rate) respectively as of January 25.
ETFs based on money markets enjoy great popularity among both institutional and private investors because of their high flexibility and low costs, Deutsche says. The db x-trackers II Eonia Total Return Index ETF, which is linked to eurozone money-market rates, has attracted more than EUR1.6bn in assets in less than seven month, making it the biggest European fixed income ETF.
‘The great success of the db x-trackers ETFs linked to the Eonia Total Return Index confirms that investors have already noticed the advantages of listed funds linked to money-market rates,’ says Thorsten Michalik, head of db x-trackers ETFs at Deutsche Bank. ‘The advantages are that they can be easily traded any time, show a high degree of transparency, have no investing limits and are adjusted daily to the official money market rate.’
The indices tracked by x-trackers money-market ETFs increase daily, compounding their value at the respective interest rate and are thus implicitly capital-protected. ‘The db x-tracker money-market ETF’s structure is extremely safe,’ says Marco Montanari, head of development for fixed-income funds at db x-trackers.
‘They have demonstrated during the past months of market crisis only the slightest divergence from the underlying indices due to the 0.15 per cent all-in fees. Besides, being Ucits III-compliant funds, our ETFs do not involve the same counterparty credit risk of deposits, certificates and bonds.’
The new ETFs based on the Sonia and Fed Funds Effective Rate indices are traded in euros on Deutsche Börse and Borsa Italiana, offering investors the additional opportunity to participate in the performance of the respective underlying currency.
In the event that sterling or the US dollar rises against the euro during the investment period, the price of the ETF in question will also increase, making the two ETFs effectively the first currency ETFs in Europe. The funds will also be listed on other European stock exchanges in the coming weeks.
Deutsche launched its db x-trackers ETF platform in January last year. The funds are listed on Euronext Paris, Borsa Italiana, Frankfurt Xetra, the London Stock Exchange and SWX Swiss Exchange and supported by market-makers that provide liquidity. There are currently 49 x-trackers ETFs based on equity, fixed income, credit, money market and commodity indices as well as ETFs tracking short indices, credit default swap indices and a global high dividend yield strategy. Further x-trackers ETFs to be launched during 2008 will offer exposure to new markets and asset classes.
Deutsche says the db x-trackers ETFs based on the MSCI Emerging Markets Index, the Eonia Money Market Rate Index and the DJ Euro Stoxx 50 had the highest inflow of new assets in Europe during 2007, while its fixed0-income ETFs were responsible for more than half of all new inflows for the asset class in Europe. The ETFs are sub-funds of the db x-trackers Sicav, a Luxembourg-domiciled umbrella fund investment company.
