Deutsche Bank, the German-based fund sponsor behind the PowerShares DB family of ETFs and ETNs, plans to market actively managed ETFs in the United States, the first being a fixed-income strategy designed to generate current income.
In paperwork it filed with U.S. regulators, Deutsche cast a wide net, seeking permission to market everything from actively managed equities ETFs to fixed-income funds to long/short portfolios as well as 130/30 strategies, domestic as well as global in scope. It said it’s also looking to market fund-of-funds ETFs.
Deutsche said in the filing its active funds that would be transparent, like all other active ETFs on the market today. That said, there has been a recent push from ETF providers such as Eaton Vance and iShares to move toward nontransparent ETFs that would only disclose holdings quarterly.
Deutsche also said in the filing that “certain future funds may operate as feeder funds in a ‘master-feeder’ structure,” which could ease collecting assets from both U.S. and non-U.S. investors alike. Vanguard uses a feeder-fundlike structure in that its ETFs are a separate share class of existing related mutual funds, though Vanguard has a patent on its approach.
In the filing, the bank detailed plans for an initial fund, which would consist primarily of investment-grade fixed-income securities from global issuers. However, as much as a quarter of the portfolio might be below-investment-grade bonds.
Deutsche Bank already offers a roster of passive ETFs and ETNs, many of which are marketed by Invesco PowerShares. Around a quarter of PowerShares’ $64 billion in assets are actually securities sponsored by Deutsche. It also launched its very own db-X brand of ETFs in the United States last year.
Deutsche Bank’s “exemptive relief” filing seek exemptions from sections of the Investment Company Act of 1940 in order to be able to market actively managed ETFs as well as what the company calls feeder funds.
The request marks the first step in a process before a company can bring an ETF to market. The process can last nine months or more.
Our annual fixed-income conference is coming up in a little more than a week and I can’t wait.
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