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First market-neutral Ucits III fund launched in the commodity space

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Deutsche Bank has announced the launch of the Ucits III-compliant DB Platinum Commodity Harvest fund, which will be publicly available in various European jurisdictions. <

Deutsche Bank has announced the launch of the Ucits III-compliant DB Platinum Commodity Harvest fund, which will be publicly available in various European jurisdictions.

Deutsche Bank believes this to be the first market-neutral Ucits III fund in the commodities space.

The fund tracks the Deutsche Bank Platinum Commodity Harvest Index which was developed and launched by Deutsche Bank in 2007, and aims to offer positive returns in both falling and rising commodity markets.

The fund provides daily liquidity for investors and is available for public distribution in Luxembourg, Germany, Italy, Switzerland, Austria and Spain.

‘Following the weak performance of commodity markets in the last few months, investors are increasingly looking for investment strategies in this space that offer potential for positive returns even in falling markets,’ says Manfred Schraepler, head of Deutsche’s fund solutions platform. ‘The DB Platinum Commodity Harvest is a good example of Deutsche Bank’s ability to deliver innovative market-neutral alpha funds.’

The DB Platinum Commodity Harvest fund follows an investment algorithm which aims to monetize market inefficiencies in the commodity space by tracking the Deutsche Bank Platinum Commodity Harvest Index.

The strategy is applied to 21 liquid commodities across the energy, metal and agriculture sectors. The index takes a long position and a short position in each of the underlying commodities and aims to buy cheap and sell expensive contracts in each of the 21 commodities.

A long position is taken on the futures contract offering the highest annualized discount or lowest annualized cost with respect to the first nearby, or next to expire, futures contract. The applicable contract is chosen through the ‘Optimum Yield’ mechanism developed by Deutsche Bank. The maximum maturity for these contracts is 13 months.

A short position is entered into for the first nearby futures contract. The short position hedges any directional exposure and results in the market neutrality of the entire strategy.

This means that the strategy does not depend on the general direction of the commodity markets. It yields positive returns if the long position performs better than the short position, while the returns of the strategy are negative if the short position performs better than the long position.

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