Daily ETF Watch: DBC Gets A New Master

PowerShares agrees to take full control of a suite of commodity ETFs.

Olly
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Managing Editor
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Reviewed by: Olly Ludwig
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Edited by: Olly Ludwig

The PowerShares DB Commodity Tracking Fund (DBC | B-86), the ETF market’s biggest futures-based broad commodity strategy, will be taken over by Invesco PowerShares in the first quarter of next year from Deutsche Bank, along with 10 other commodity ETFs the two firms together have designed and brought to market over the past eight years.

The transfer of the management of the “PowerShares DB” product suite will free both companies to pursue their respective strategies: PowerShares’ further push into the commodity ETF space; and Deutsche’s development of its increasingly successful “X-trackers” ETF franchise in the U.S., the two companies said in a recent press release. Terms weren’t disclosed.

The “PowerShares DB” product line, which Deutsche Bank manages and PowerShares markets, was created in 2006. DBC now makes up nearly $5 billion of the $8.2 billion, according to data compiled by ETF.com. Again, the transaction is expected to close in 2015’s first quarter, after necessary approvals have been obtained, the companies said.

PowerShares said its future commodity fund plans includes the introduction of products registered under the Investment Company Act of 1940. That’s distinct from funds in the existing “PowerShares DB” product line, which are registered under the Securities Exchange Act of 1933.

This means that the existing product line is taxed using “K-1” forms reserved for futures-related strategies, while the newer products will be taxed using “1099” forms reserved for the vast majority of ETFs, including equities funds.

For its part, Deutsche, as ETF.com analyst Dennis Hudachek wrote in a blog, is starting to get serious traction with its “X-trackers” lineup of funds. Perhaps most notable is its suite of currency-hedged equity funds that protect U.S. investors from the currency-related vagaries of international investing at a time when the dollar is strengthening and the yen and euro are weakening.

As an example, assets in the Deutsche X-trackers MSCI Europe Hedged Equity ETF (DBEF | B-64) have exploded upward this year to nearly $500 million from a trivial $8 million at the end of 2013.

 

Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.