The first London-listed actively-managed exchange-traded fund of funds, the db x-trackers SCM Multi Asset Ucits ETF, has reached its one-year anniversary since listing, registering risk-adjusted outperformance versus standard benchmark UK equities and UK Gilts indices.
The ETF, which provides exposure to a portfolio of exchange-traded products actively managed by SCM Private, a third-party asset manager that specialises in running asset allocation portfolios primarily consisting of ETFs, had a Sharpe ratio of 1.0 per cent for the year since launch, posting returns of 7.85 per cent p.a with volatility of 7.84 per cent p.a.
The equivalent Sharpe ratios for the FTSE 100 Index and for the iBoxx Gilts Overall Index were, respectively, 0.79 per cent p.a and 0.28 per cent p.a. The higher the Sharpe ratio the greater the return generated per unit of volatility.
Alan Miller, chief investment officer of SCM Private, says: “Our aim is to generate consistent outperformance on a risk-adjusted basis, and I’m pleased to see that we’re meeting that challenge. Dynamic asset allocation, as opposed to individual stock and bond picking, is gaining in prominence, and as more people migrate towards self-directed investing, we hope many more investors will consider this as an attractive alternative to traditional fund-of-funds, but with significantly lower and more transparent costs.”
The ETF has an “all-in” fee (not including portfolio rebalancing costs) of 0.89 per cent per annum. The majority of Deutsche Asset & Wealth Management’s ETFs and exchange-traded commodities (ETCs) are available for inclusion in the strategy, with selection and weightings determined on at least a monthly basis by SCM Private.
“A benefit of investing in this way is the significant diversification the investor gains. It means investors can, with just a single trade, acquire exposure to over 2,000 shares and bonds from 50 different countries,” adds Miller.
The portfolio composition is growth oriented, currently with around 60 per cent exposure to equities and 40 per cent to bonds (emerging market and corporate bonds). Approximately two-thirds of the portfolio is exposed to sterling denominated assets, with the addition of liquid international currency exposure provided in line with SCM Private’s risk and diversification objectives.
Manooj Mistry (pictured), Deutsche Asset & Wealth Management’s head of exchange-traded products, EMEA, says: “We believe that in future more investors will be looking to managers engaged in active asset allocation to generate ‘alpha’. The db x-trackers SCM Multi Asset Ucits ETF, now with a year of trading behind it, is well placed to serve that need.”
The ETF is eligible for inclusion in stocks and shares ISAs (Individual Savings Accounts) and SIPPs (Self Invested Personal Pensions) and is exempt from stamp duty on the London Stock Exchange.