Europe’s second largest exchange traded funds (ETF) provider, db X-trackers, is launching a new initiative that aims to provide investors with the choice of direct or indirect tracking of major equity benchmarks.
In a first for the ETF industry, buyers of db X-trackers ETFs will be able to invest in line with their replication preference for certain ETFs tracking the German, US, Japanese, British, and Eurozone equity markets. The direct replication products will include the identifier ‘(DR)’ in their fund names. As with all db X-trackers ETFs, the new products will be fully compliant with the UCITS regulations.
“This is a significant step. For the first time investors will be able to go to a single provider and choose not only the type of market exposure they want, but also the type of tracking method they feel most comfortable with,” says Thorsten Michalik, global head of db X-trackers. “Some client segments have shown a preference for direct replication, and as a provider we aim to meet that demand.”
ETFs are designed to track market performance by matching as closely as possible the movements of indices. Indirect replication – also known as swap-based or synthetic replication – involves the ETF entering an agreement with a counterparty to provide the returns of the index being tracked. With direct replication products, the ETF invests directly in all or a subset of the securities that constitute the index.
“Having established what I believe to be the premier indirect replication ETF platform, producing products with the highest standards of transparency and structural integrity, we now aim to apply similar exacting standards to our new direct replication products,” says Michalik.
Michalik continued, “In the five years since our launch in 2007, db X-trackers has become one of the leading ETF providers in Europe. Delivering replication choice to investors will play a key part in maintaining our leading position for the next five years.”
Initial rollout of the new direct replication ETFs is currently scheduled for December and will continue into 2013.