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Deutsche Bank AG (XDER)

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Tuesday 11 May, 2010

Deutsche Bank AG

db x-trackers Announcement

db x-trackers Announcement

Deutsche Bank AG

db x-trackers expands ETF range and launches seven daily leveraged ETFs

db x-trackers, Deutsche Bank’s Exchange Traded Fund (ETF) platform, has listed seven new daily two times leveraged ETFs on the London Stock Exchange; three tracking daily leveraged short indices and four tracking daily leveraged long indices from recognised index providers. The three daily leveraged short ETFs track indices that provide two times daily inverse exposure to the DAX®, Euro STOXX 50® and S&P 500. The four daily leveraged long ETFs track indices that provide two times daily long exposure to the DAX®, Euro STOXX 50®, FTSE 100 and S&P 500. The launch of the daily leveraged ETFs complements the range of 16 daily one times short equity ETFs from db x-trackers, the leading provider of such products in Europe.

The daily leveraged ETFs are suitable for financially sophisticated institutional investors who want to use them for short-term trading or hedging strategies to react in real time to intra-day market fluctuations and take advantage of rising or declining markets. As they are ETFs they are easy and convenient to use and can be traded and settled in the same way as any listed stock or security. For some investors they can be an effective substitute for other short term derivatives such as futures and CFDs/swaps without the need for opening or maintaining a margin account or entering into derivatives agreements.

Manooj Mistry, head of db x-trackers UK said: “Our experience of marketing the range of db x-trackers short ETFs has shown that there are many institutional investors who want to take tactical leveraged or short positions in their portfolios but do not necessarily have the infrastructure to use derivatives or to go short through borrowing ETF shares. When used correctly, the daily leveraged ETFs can provide sophisticated institutional investors with a liquid and efficient way to implement short term trading or hedging strategies within their portfolios.”

Since their introduction in the US in 2006 and Europe in 2007 Short and Leverage ETFs have been a huge success. Currently 15.19% of the overall ETF Turnover in the US and 20.9% of the European ETF turnover relates to those ETFs. “Within five years daily short and leverage products have become an important part of the Exchange Traded Funds landscape in the US and Europe,” added Mr. Mistry.

The daily leveraged ETFs from db x-trackers do not have returns that are two times proportional or inversely symmetrical to the corresponding long index for investment periods of more than one day and thus there could be a divergence between actual and expected returns over investment periods of more than one day – see notes below for detailed explanation of how daily leveraged ETFs work.

Details of the new Daily Leveraged ETFs listed on the London Stock Exchange are:

Daily leveraged long ETFs

Name   All-in Fee   Trading Currency   Exchange Code   Bloomberg Code   Reuters Code   Sedol   ISIN
Daily LEVDAX 0.35% GBP XLDX XLDX LN XLDX.L B614SD1 LU0411075376
FTSE 100 Daily Leveraged 0.50% GBP XUL2 XUL2 LN XUL2.L B61BJ73 LU0412625088
S&P 500 2x Daily Leveraged 0.60% GBP/USD XSL2/ XSLD XSL2 LN XSL2.L B61NZ71 LU0411078552
EURO STOXX 50 Leveraged Daily 0.35% GBP XEL2 XEL2 LN XEL2.L B616150 LU0411077828

Daily leveraged short ETFs

Name   All-in Fees   Trading Currency   Exchange Code   Bloomberg Code   Reuters Code   Sedol   ISIN
S&P 500 Daily 2x inverse 0.70% GBP/USD XT21/ XT2D XT21 LN XT21.L B614WJ5 LU0411078636
Daily SHORTDAX x2 0.60% GBP XSD2 XSD2 LN XSD2.L B61BDZ9 LU0411075020
EURO STOXX 50 Daily DOUBLE SHORT 0.50% GBP XEDS XEDS LN XDES.L B61N935 LU0417510616

Notes

The db x-trackers ETFs on daily leveraged indices are appropriate only for financially sophisticated institutional investors who understand their strategy, characteristics and risks and are not suitable for investors who want to use them as a buy and hold investment or do not intend to monitor their portfolio on a daily basis. For the db x-trackers ETFs tracking the daily leveraged indices, a relatively small adverse movement in the value of the underlying long index may result in a disproportionately larger loss to an investor.

How daily leveraged ETFs work

The starting point for the daily leveraged index calculation on each day is the closing value of the daily leveraged index from the previous day. This means that the reference point for the daily leveraged lindex performance is reset on a daily basis. Therefore, when comparing the performance of the daily leveraged index versus that of the corresponding long index, the day to day returns of the daily leveraged index will be more or less two times the corresponding long index returns. (or two times the inverse returns for the daily leverage short indices) However, when performing the same comparison for periods of more than one day, the returns of the daily leveraged index will not be two times the returns of the corresponding long index on a positive or inverse basis. This is due to the effects of compounding of the daily returns and is best illustrated with the two examples below.

Example 1 – Flat market

Day   1   2   3   4   5   Cumulative change
Daily change   -1.0% 1.0% -0.5% 1.5%  
Long Index 100 99.00 99.99 99.49 100.98 0.98%
Daily Long Leveraged Index 100 (-2%)

98

(2%)

99.96

(-1%)

98.96

(3%)

101.93

1.93%

Example 2 – Volatile Market

Day   1   2   3   4   5   Cumulative change
Daily change   11% -12% 14% -10%  
Long Index 100 111.00 97.68 111.36 100.22 0.22%
Daily Long Leveraged Index 100 (22%)

122.00

(-24%)

92.72

(28%)

118.68

(-20%)

94.95

-5.05%

In both examples the long index level has started the week at 100 and finishes the week close to 100 again. In Example 1 the daily changes in the long index are small (below 1.5% each day) and in Example 2 the daily changes in the long index are large (above 10% each day).

As Example 2 illustrates, the daily leveraged long index is likely to underperform versus the corresponding long index during periods where markets are volatile and exhibit large day to day movements even though the cumulative movement over the relevant period with respect to the corresponding long index is minimal. In this situation it is important that investors monitor their positions and changing exposure on a daily basis and make adjustments if necessary. For example, if an investor is using a Daily Leveraged Long ETF for hedging purposes (ie to hedge a short position against market rises) then the amount being hedged would need to be adjusted on a daily basis. A relatively small adverse movement in the value of an underlying long index may result in a disproportionately larger loss to an investor in a Daily Leveraged Long ETF.

For more information please contact:

Brunswick Group

Helen Barnes / Guy Potvin +44 (0)207 404 5959

E-mail: [email protected]

About db x-trackers

db x-trackers are Exchange Traded Funds (“ETFs”) – an index tracking solution of Deutsche Bank AG. db x-trackers was launched in January 2007 and is now one of the leading ETF providers in Europe. db x-trackers ETFs are listed on eight different exchanges across Europe and Asia (Borsa Italiana, Frankfurt Xetra, Paris Euronext, London Stock Exchange, Zurich SIX Swiss Exchange, NasdaqOMX Stockholm, Singapore Exchange and Hong Kong Stock Exchange). The ETFs are based on various asset classes including equity, fixed income, currencies and commodities. Investors are able to invest in a very transparent, flexible and efficient way. db x-trackers ETFs are domiciled in Luxembourg and comply with the UCITS III regulations. More information on db x-trackers can be found on www.dbxtrackers.com

About Deutsche Bank

Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With 80,277 employees in 72 countries, Deutsche Bank offers unparalleled financial services throughout the world. The bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people. More information on Deutsche Bank can be found on www.db.com

Disclaimers

This document does not create any legally binding obligations on the part of Deutsche Bank AG and/or its affiliates. Without limitation, this document does not constitute investment advice and does not constitute an offer or a recommendation to enter into any transaction. Investments in funds involve numerous risks including, among others, general market risks, credit risks, foreign exchange risks, interest rate risks and liquidity risks. The value of an investment in a Deutsche Bank fund may go down as well as up and past performance is not a guide to future results. Please refer to the relevant fund’s full prospectus and any relevant simplified prospectus for more information on Deutsche Bank funds. Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin – Federal Financial Supervising Authority) and is regulated by the Financial Services Authority for the conduct of investment business in the United Kingdom.


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