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TER for DJ Euro Stoxx 50 ETF reduced to zero per cent

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db x-trackers has reduced the total expense ratio for its DJ Euro Stoxx 50 exchange-traded funds from 0.15 per cent to zero per cent effective from 20 July 2009.

db x-trackers has reduced the total expense ratio for its DJ Euro Stoxx 50 exchange-traded funds from 0.15 per cent to zero per cent effective from 20 July 2009.

Investors are now able to gain exposure to the Eurozone blue chip equity benchmark index at zero per cent TER.

Since its launch two and a half years ago the db x-trackers DJ Euro Stoxx 50 ETF has outperformed the benchmark index by 1.53 per cent after fees. This is equivalent to an annualised outperformance of 0.61 per cent p.a. after fees.

db x-trackers has also announced that the net asset value of certain of its synthetic replication ETFs will be fully covered through a process of over-collateralisation.

‘We can now combine the superior tracking performance of synthetic replication ETFs with a reduced impact of counterparty default risk as the NAV of these ETFs will be fully covered at all times,’ says Thorsten Michalik, head of db x-trackers.

The fully covered NAV is achieved through over collateralisation of the index swap transaction. Deutsche Bank will deliver assets to a ring fenced custody account with a value greater than the NAV of the relevant ETF. In the event of a default of Deutsche Bank as counterparty these assets would then become the property of the ETF and sold with investors receiving 100 per cent of NAV at the time of default. The costs of the additional collateral to the custodian will be borne by Deutsche Bank and will not impact the performance of the ETF.

Manooj Mistry, head of equity ETF structuring at db x-trackers, says: ‘Since the onset of the credit crunch in mid 2007 there have been concerns about credit risk and the impact of counterparty exposure for investment products. ETFs using synthetic replication of an index can deliver perfect index tracking performance before the accrual of fees. Now, in addition to this, by over-collateralising the index swap transaction of certain db x-trackers ETFs we have reduced the impact of counterparty risk on the NAV of these ETFs.’ 

The fully collateralised ETF structure has been implemented across a range of equity, commodity and currency ETFs.

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