Deutsche announces changes to emerging markets eurobond ETF

Aug 8th, 2017 | By | Category: Fixed Income

Deutsche Asset Management has announced a number of changes to the db x-trackers II Emerging Markets Liquid Eurobond UCITS ETF (Xetra: XEMB), which include changing the ETF’s name, total expense ratio, replication method and the index it tracks.

Deutsche emerging markets eurobond ETF to change index

The fund, which has €560m in assets, will now track an index provided by Citi.

From 7 November 2017, the ETF will be known as the db x-trackers II Emerging Markets USD Bond ETF.

On the same date, the total expense ratio of the fund will fall from the current 0.55% to 0.40%.

Also on the same date, the fund will switch from a swap-based replication methodology to full physical replication.

The fund will gradually transition from the Deutsche Bank Emerging Markets Liquid Eurobond EUR Hedged Index to the Citi Emerging Markets USD Government and Government-Related Bond Select Index, Currency Hedged in EUR Terms over a period of 20 days beginning on 6 October 2017 and concluding on 6 November 2017.

A gradual transition gives portfolio managers time to unwind the current portfolio and purchase the new one, with the aim of minimising transaction costs.

The main differences between the old and the new indices are that the new index is a broader measure of emerging market government debt and has a lower minimum credit rating. Additionally, the new index will only include dollar denominated debt, whereas the old index includes debt denominated in a range of global reserves currencies as well as the dollar.

The new index measures the performance of investment grade and high yield US dollar-denominated debt issued by governments, regional governments and government-sponsored entities in emerging markets. To be eligible, securities must have a minimum issue size of $1 billion and have a minimum credit rating of C from Standard and Poor’s. The minimum maturity is three years for new entrants and two years for existing portfolio constituents.

The old index gives exposure to tradable debt issued by governments or state-owned companies in certain emerging markets in Europe, the Middle East, Africa, Asia and Latin America.

To be included in the index bonds must meet certain criteria, including minimum and maximum credit ratings of the issuers. The bonds must be payable in euros, pounds sterling, US dollars or Japanese yen and have a repayment period of between five and 30 years, with an aim of selecting bonds with a repayment period of around nine years. At present, the largest country exposures are Poland (10.7%), Mexico (10.0%) and Turkey (9.9%).

The fund was launched in May 2008 and currently has €560 million in assets.

Tags: , , , , ,

Leave a Comment



More in Fixed Income
PowerShares Source rolls out new euro bond ETF in partnership with PIMCO
PowerShares rolls out eurozone HY bond ETF in partnership with PIMCO

Invesco PowerShares has unveiled a eurozone short-term high yield ETF to complement its existing $1.2 billion US-focused product. Launched in partnership with fixed...

Columbia Threadneedle launches smart beta fixed income ETF
Columbia Threadneedle launches smart beta fixed income ETF

Columbia Threadneedle has launched the Columbia Diversified Fixed Income Allocation ETF (NYSE Arca: DIAL), building out its smart beta ETF suite. DIAL provides...

Close