DB’s latest ETF slices up the mainland China market into small-caps.
Deutsche Bank has updated regulatory paperwork for its proposed db X-trackers Harvest CSI 500 China A-Shares Small Cap Fund to include a ticker—ASHS—and an expense ratio of 0.82 percent, or $82 for each $10,000 invested, signaling that the fund is near launch.
The fund will go live at a time when disappointing manufacturing and real estate data coming out of China continues to be a drag on related ETFs. However, DB is betting that when the world’s second-largest economy regains momentum, small-caps will the first asset class to reflect that resurgence.
ASHS will track the CSI 500 Index, composed of the 500 smallest and most liquid stocks in the China A-Share market. At the end of April, the fund was tilted significantly to industrials, but was relatively light on high-growth plays like telecommunications and Internet, the filing said.
“If the new funds do what they say they’re going to do, they’ll still lose money because their indexes comprise sectors that are under pressure and have low investor demand,” James McDonald, chief investment officer at Index Strategy Advisors, said in a telephone interview, underscoring his current skepticism about A-Shares ETFs in general.
First Trust is changing its actively managed First Trust Tactical High Yield ETF (HYLS | D) to include floating-rate bank loans and futures.
Effective July 11, the fund, which currently is heavily weighted to junk bonds (27 percent), will invest up to 40 percent of its assets in bank loans; with 15 percent in junior loans, and the rest in first-lien senior secured floating-rate bank loans, according to a regulatory filing.
Unlike fixed-rate debt securities, prices on floating-rate securities are less sensitive to fluctuations in the interest rates because the coupons of the bond adjust regularly, partially offsetting the impact of changes in interest rates.
The Federal Reserve has signaled its intentions to raise rates sooner rather than later in 2015 as it continues to taper its bond-buying program.
Also, the fund is investing up to 30 percent of its assets in U.S. exchange-traded options on futures contracts and U.S. exchange-traded futures contracts.
HYLS, which launched in February 2013, now has $100 million in assets under management, according to data compiled by ETF.com Analytics.