Daily ETF Watch: ‘Junior’ Debt ETF Nears

March 25, 2014

DB’s latest proposed bond ETF is looking to juice up yields for investors.

Deutsche Bank has updated regulatory paperwork for its proposed junior investment-grade bond with associated fees and tickers, suggesting the fund is nearing launch.

The fund, dubbed the db X-trackers Solactive Investment Grade Subordinated Debt Fund (SUBD) is designed to broaden index investors’ access to credit markets at a time of paltry yields. It will track the Solactive Subordinated Bond Index, which comprises U.S.-dollar-denominated subordinated corporate securities, according to its regulatory filing.

Subordinated securities are “junior” to more senior securities of the issuer and are entitled to payment after other holders of debt in that issuer. Junior securities generally rank slightly higher in terms of payment priority than both common and preferred stock of an issuer, but rank below other more senior debt securities.

What that means is that yields should be a bit higher than on the corporate debt in many ETFs now on the market.

That may help the planned fund’s fortunes if and when it comes to market, because yields have been so low in the years following the crash of 2008-2009, and because investors have clearly demonstrated an openness to find yield in unlikely places, such as in senior loans.

SUBD’s expense ratio is 0.45 percent, or $45 for every $10,000 invested.

Launches

  • On Wednesday, March 26, UBS is launching its Etracs Monthly Reset 2xLeveraged S&P 500 total Return ETN (SPLX) on the NYSE Arca, according to a NYSE communique. Additional information about the fund wasn’t available on the issuer’s website or the NYSE Arca exchange.

 

 

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