Infrastructure and utility sectors likely to benefit the most from the ECB’s programme
Infrastructure and utility sectors corporate bonds likely to benefit the most from the ECB’s Corporate Sector Purchase Programme (CSPP). The programme will also be particularly supportive for corporate bonds issues from the euro area core. The ECB’s support to larger firms will likely have a positive impact on growth and employment figures.
As widely expected, the ECB left policy rates and the amount of the monthly purchases (EUR80bn) unchanged at its June meeting. But, Mr Draghi announced that the Corporate Sector Purchase Programme (CSPP) will start on June 8 and that the first operation of TLTRO2 will be conducted on June 22. So far, we know that the CSPP – part of the broad EUR80bn monthly purchase – will include corporate bonds with a maturity from 6 months to 30 years and with a minimum rating of BBB-. Also, national central banks will buy on behalf of the ECB up to 70% of any individual bond.
More importantly, Mr Draghi stressed the need for countries to focus on rising productivity and improving business environment, by enhancing public infrastructure and as per Juncker’s “Investment Plan for Europe” announced in November 2014. We believe the CSPP is a genuine way to deepen and integrate capital markets in the euro area, which was one of the main challenges addressed by the Juncker’s plan for a Capital Market Union (CMU). Overall, small and medium-sized enterprises (SMEs), which rely on banks for 80% of their financing, have benefited most from the ECB’s programmes so far. By including Investment Grade euro-denominated bonds issued by non-financial corporates (NFCs) established in the euro area in the list of assets that are eligible for regular purchases, the ECB is now enlarging its programme to also support larger firms with potential larger impact on growth and employment figures. We believe the start of the CSPP next Wednesday will likely be most beneficial to European infrastructure and utilities corporate bonds. The Infrastructure and Utility sectors together represent the largest proportion of the bonds eligible for the CSPP, according to our estimates (up to 55%). Furthermore they appear to be the sectors targeted to increase the growth potential in the euro area.
Morgane Delledonne, Fixed Income Strategist at ETF Securities
Morgane Delledonne joined ETF Securities as Fixed Income Strategist in 2016. Morgane has an extensive experience in Monetary policy, Fixed Income Markets and Macroeconomics gained at the French Treasury’s Office in Washington DC and most recently in her role as Macroeconomist and Strategist at Pictet&Cie in Geneva. Morgane holds a Bachelor of Applied Mathematics from the University of Nice Sophia Antipolis (France), a Master of Economics and Finance Engineering and a Master of Economic Diagnosis from the University of Paris Dauphine (France).
Global ETP sector again records net inflows in November; Another strong month for American ETP market; Substantial inflows for Equity ETFs in particular; Asia ETFs recorded significant outflows; Positive trend for Bond ETFs at an end for now.
Europe Monthly ETF Market Review; Deutsche Bank Markets Research
Data as at: 30.11.2015 Global ETP sector again records net inflows in November
Global ETP Market In and Outflows:
• The global ETP industry continued to grow during November. After net inflows totaling US dollar 34 billion in October, the November figure was a further US dollar 25.7 billion. As such, the industry now manages US Dollar 2.9 trillion. (p. 1, 23)
• As in the previous month, the American ETP sector was the driver of this growth. It contributed US dollar 26 billion to global growth. Since the start of the year US ETPs have secured virtually US dollar 200 billion. In keeping with the previous month, inflows from Equity ETFs dominated with US dollar 25 billion.
• The trend for Bond ETFs turned negative in November. In contrast to worldwide inflows of US dollar 14.5 billion for this segment in October, during the month just past investors withdrew US dollar 47 million. (p. 23)
• Inflows also declined for Commodities ETCs. After a plus of US dollar 789 million in October, the past month saw a minus of US dollar 153 million. (p. 23)
• In parallel with the American ETP sector, the European ETF sector continued to grow during November. Following net inflows of US dollar 6.9 billion for October, the sector secured US dollar 3.4 billion in November. Equity ETF inflows also dominated in this case. (p. 23)
• Conversely, Asian ETPs saw a continuation of the negative trend of the previous month. Investors withdrew US dollar 3.7 billion. Equity ETFs were particularly affected with outflows running to US dollar 3 billion. In fact, Bond ETFs also recorded a decline. (p. 23).
European ETF Market In and Outflows Equities
• The positive trend for European ETFs continued during November. In total, the sector recorded net inflows of Euro 3.1 billion, compared with October’s Euro 5.9 billion. This was primarily due to Bond ETFs with net inflows of Euro 515 million which was significantly lower than the previous month (+ Euro 3.5 billion). At the same time, net inflows for Equity ETFs at Euro 2.5 billion were slightly higher than in October (+ Euro 2.4 billion). (p. 23)
• ETFs on US Equities were particularly in demand with European investors. With net inflows of Euro 637 million, US Equities accounted for one quarter of positive Equity ETF cash flows, followed by Global Indices (+ Euro 436 million) and Japanese Equities (+ Euro 387 million). This marked a trend change for US Equities after investors withdrew capital totaling Euro 227 million from this segment in October. Net inflows recorded by ETFs on European Equities fell to Euro 54 million after Euro 1.1 billion the previous month. (p. 25)
• Since the start of the year, cumulative net inflows recorded by ETFs on broadly-based European Equity Indices total Euro 20.3 billion, although during November the trend showed a slight change with investors withdrawing Euro 279 million from this segment. (p. 25)
• The positive shift in ETFs on Emerging Markets continued in November. This segment recorded a further Euro 6 million following Euro 824 million in October. Since the start of the year however, Emerging Markets ETFs have registered total outflows of Euro 1.9 billion. (p. 26)
• Having said that, during November inflows for ETFs on large Emerging Markets declined, in particular India ETFs where investors withdrew Euro 225 million. Positive inflows were recorded by ETFs on international Emerging Markets Indices. (p. 26)
• Strategy ETFs achieved a turnaround in November again registering inflows of Euro 178 million, after October’s outflows of Euro 481 million. (p. 24)
Bonds
• The positive trend for Bond ETFs also progressed in November, although net inflows of Euro 0.5 billion were significantly lower than the October figure (+ Euro 3.5 billion). (p. 26)
• In this arena, ETFs on Corporate Bonds accounted for the highest inflows with Euro 1.7 billion. This exceeded the October inflows figure. From an annual viewpoint, Corporate Bonds have registered net inflows amounting to Euro 13.1 billion. (p. 26)
• The positive trend over recent months for Sovereign Bonds has come to an end for the time being. Investors withdrew Euro 1.3 billion from this segment. (p. 26)
Commodities
• European Commodities ETPs registered Euro 166 million in November after Euro 340 million during October. (p. 27)
•While ETFs on Industrial Metals did once again generate slightly positive cash flows, ETFs on Precious Metals shed Euro 167 million contrasted with October when this segment had made a positive contribution to inflows. (p. 27)
Most Popular Indices
• In November, investors showed interest in Real Estate and Dividend ETFs. As such, ETFs on Real Estate Equity Indices in particular came high up the lists. (p. 28)
• The most popular Equity Indices in November were the S&P 500, the Euro STOXX 50 as well as the Stoxx 600. (p. 28)
• In the Bond arena, ETFs on Corporate Bond Indices in particular proved to be some of the most popular indices. (p. 28)
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─ ETFs with indirect replication carry a counterparty risk of max. 10% of the net book value from derivatives transactions according to restrictions set out in OGAW/UCITS III.
─ The value of ETF units can be negatively influenced by legal, economic or political changes, market volatility and/or volatility in the assets of the sub-fund and/or the reference object.
─ The value of ETF units can fall at any time below the price that the investor paid for the fund units. Losses can result.
─ The value of ETF units can be negatively influenced by fluctuation in exchange rates.
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This document and the information contained therein may be distributed or published only in those countries where the relevant local legislation permits it. Direct or indirect distribution of this document is prohibited in the in United States, as is forwarding to US persons or person resident in the USA. Information contained in this document is promotional material and not a financial analysis. This promotional material is neither subject to any statutory requirements on impartiality of financial analyses nor to any prohibition of trading prior to publishing financial analyses. Past performance is not a reliable indicator of future performance. Performance is calculated according to the BVI (the association for investment fund management companies and investment funds) method, i.e. excluding the front-end load. Individual costs such as fees, commissions and other charges are not included and would have a negative impact on performance. Due to their composition or the techniques used for fund management, sub-funds may be subject to increased volatility (value fluctuation). The registered office of db x-trackers (RCS-No.: B-119.899), a company registered in Luxembourg, is 49 Avenue J.F. Kennedy, L-1855 Luxembourg. db x-trackers® is a registered brand name of Deutsche Bank AG. Supplementary Information for Investors from the Federal Republic of Germany German-language versions of the Prospectus, Key Investor Information, Articles of Association, as well as the Annual and Half-Year Reports can be obtained in electronic or print form for free from Deutsche Bank AG, TSS/Global Equity Services, Taunusanlage 12, 60325 Frankfurt am Main, Germany and can also be accessed on the Internet at www.funds.db.com.
Deutsche Asset & Wealth Management launches USD corporate bond ETF
Deutsche Asset & Wealth Management launches an ETF that provides exposure to the US dollar-denominated liquid corporate bond market.
db x-trackers Barclays USD Corporate Bond UCITS ETF (DR)* tracks the Barclays USD Liquid Investment Grade Corporate Index. The index comprises almost 1,500 bonds2, over 80% of which have been issued by US-domiciled companies. The ETF has listed on the Deutsche Börse and will shortly list on the London Stock Exchange.
The average credit rating of bonds in the index is investment grade (i.e. at least Baa3 from Moody’s, BBB from Fitch Ratings, or BBB- from Standard & Poor’s), while the current index yield is 3.69%3.
“With yields on many short maturity major government bonds now in negative territory, which means investors are effectively paying to own these bonds, there is a demand for fixed income exposure that generates a reasonable yield. Our new US dollar corporate bond ETF helps meet that demand,” comments Erik Rotander, Head of the Nordics, Passive Investments.
The ETF is physically replicating and has an All-in Fee of 0.2% per annum.
By the end of August this year, fixed income ETFs globally had generated almost USD 52.8 billion in inflows year-to-date4.
Deutsche AWM has a large suite of fixed income ETFs, including the db x-trackers Barclays Global Aggregate Bond UCITS ETF**, which tracks the global market for government, governmental, supranational, corporate, asset-backed and mortgage-backed securities across the full spectrum of maturities and the investment-grade credit rating range. The ETF launched in March 2014 and has EUR 500 million in assets under management5.
1 Source: Deutsche AWM, September 29, 2015
2 Source: Barclays Bank plc, September 17, 2015
3 Source: Barclays Capital Indices, October 4, 2015
4 Source: ETFGI, September 8, 2015
5 Source: Deutsche AWM, September 29, 2015
* A sub-fund of Concept Funds Solutions plc.
** A sub-fund of db x-trackers and domiciled in Luxembourg.
Product Details
Name of ETF: db x-trackers Barclays USD Corporate Bond UCITS ETF (DR)
BBG Code: XDGU
ISIN: IE00BZ036H21
Fund Currency: USD
Listing Currency: USD
Annual All-in Fee: 0.20%
Physical/synthetic: Physical
UCITS compliant: Yes
Deutsche Asset & Wealth Management
With EUR 1.14 trillion of assets under management (as of June 30, 2015), Deutsche Asset & Wealth Management¹ is one of the world’s leading investment organizations. Deutsche Asset & Wealth Management offers individuals and institutions traditional and alternative investments across all major asset classes. It also provides tailored wealth management solutions and private banking services to high-net-worth individuals and family offices.
¹ Deutsche Asset & Wealth Management is the brand name of the Asset & Wealth Management division of the Deutsche Bank Group. The legal entities offering products or services under the Deutsche Asset & Wealth Management brand are listed in contracts, sales materials and other product information documents.
Investors should note that the db X-trackers UCITS ETFs1 are not capital protected or guaranteed and investors should be prepared and able to sustain losses of the capital invested up to a total loss.
Shares in db X-trackers UCITS ETFs which are purchased on the secondary market cannot usually be sold directly back to the relevant fund. Investors must purchase and redeem such shares on the secondary market with the assistance of an intermediary (e.g. a market maker or a stock broker) and may incur fees for doing so (as further described in the applicable prospectus). In addition, investors may pay more than the current net asset value of a share in a db X-trackers UCITS ETF when buying shares on the secondary market, and may receive less than the current net asset value when selling such shares on the secondary market.
Investments in funds involve numerous risks including, among others, general market risks, credit risks, foreign exchange risks, interest rate risks and liquidity risks. The value of an investment in a db X-trackers UCITS ETF may go down as well as up and investors may not get back the full amount of their original investment.
Important Notice
This press release has been issued and approved by Deutsche Bank AG, London Branch and has been prepared solely for information purposes and, offer or a recommendation to enter into any transaction.
Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority and Financial Conduct Authority. Deutsche Bank AG is a joint stock corporation with limited liability incorporated in the Federal Republic of Germany, Local Court of Frankfurt am Main, HRB No. 30 000; Branch Registration in England and Wales BR000005 and Registered Address: Winchester House, 1 Great Winchester Street, London EC2N 2DB.
Please refer to the relevant fund’s full prospectus and the latest version of the Key Investor Information Document for more information on db X-trackers UCITS ETFs. These documents are available free of charge from Deutsche Bank AG, London Branch and constitute the only binding basis for purchase of shares in the ETFs. As explained in the relevant offering documents, distribution of ETFs is subject to restrictions in certain jurisdictions. The ETFs described herein may neither be offered for sale nor sold in the USA, in Canada, in Japan to US Persons or to persons residing in the USA.
The indices mentioned herein are registered trademarks of their respective licensors. The ETFs described in this document are not sponsored, endorsed, sold or promoted in any way by the Licensors of the indices mentioned herein (with the exception of Deutsche Bank AG). The Licensors of the indices mentioned here (including Deutsche Bank AG) make no representations or warranties concerning the results obtained by using their indices and/or index levels or in any other respect, on any given day. The index sponsors are not liable for errors in their indices and are not obliged to provide information of such errors.
