Deutsche gives details on four new X-trackers interest-rate-hedged fixed-income funds

By Toni Weeks

San Luis Obispo, Calif., Nov. 13 – DBX ETF Trust gave more details in an N-1A filing with the Securities and Exchange Commission about its four new exchange-traded funds, each one using a passive investment approach to track the performance of its applicable underlying index.

The new funds are the Deutsche X-trackers High Yield Corporate Bond - Interest Rate Hedged ETF, Deutsche X-trackers Investment Grade Bond - Interest Rate Hedged ETF, Deutsche X-trackers U.S. Aggregate Bond - Interest Rate Hedged ETF and the Deutsche X-trackers Emerging Markets Bond - Interest Rate Hedged ETF.

With the short positions, the underlying index seeks to mitigate the potential negative impact of rising Treasury interest rates on the performance of a specific class of bonds, conversely limiting the potential positive impact of falling interest rates. The short positions are not intended to mitigate other factors influencing prices, such as credit risk.

The long positions in the index are designed to represent the more liquid universe of the applicable class of bonds.

New York-based DBX Advisors LLC, an indirect, wholly owned subsidiary of Deutsche Bank AG, will act as the investment adviser.

High-yield ETF

The new high-yield fund (NYSE Arca: HYIH) will seek investment results that correspond generally to the performance, before fees and expenses, of the DBIQ USD High Yield Corporate Bond - Interest Rated Hedged index, which will be comprised of long positions in dollar-denominated high-yield corporate bonds and short positions in U.S. Treasury notes or bonds of, in aggregate, a roughly equivalent duration to the high-yield bonds.

Under normal market conditions, the fund will invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in high-yield corporate bonds and at least 80% of its total assets in instruments that comprise the underlying index.

Total annual fund operating expenses are expected to be 0.45% and consist solely of a 0.45% management fee.

Gary Russell and Tom Bouchard are the portfolio managers.

Investment-grade ETF

The Deutsche X-trackers Investment Grade Bond – Interest Rate Hedged ETF (NYSE Arca: IGIH) is identical in investment objective and strategy to its high-yield counterpart except that the underlying index, the DBIQ USD Investment Grade Bond - Interest Rate Hedged index, will consist of long positions in dollar-denominated investment-grade corporate bonds and short positions in U.S. Treasury notes or bonds of, in aggregate, approximate equivalent duration to the investment-grade corporate bonds.

Total annual fund operating expenses of 0.25% consist solely of a 0.25% management fee.

Thomas Farina, Alvin Burgos and Kelly Beam will serve as portfolio managers.

High grade, broader portfolio

The Deutsche X-trackers U.S. Aggregate Bond - Interest Rated Hedged ETF (NYSE Arca: AGIH) will seek the same investment objective, but its underlying index, the DBIQ U.S. Aggregate Bond - Interest Rated Hedged index, will measure the performance of the total U.S. investment-grade bond market. The index will include long positions in dollar-denominated government-related bonds, corporate bonds and certain mortgage- and asset-backed securities as well as short positions in U.S. Treasury bonds.

Total annual fund operating expenses and the management fee have not yet been determined.

Farina and Scott Agi have been named portfolio managers.

Emerging Markets ETF

The emerging markets fund (NYSE Arca: EMIH) shares a similar investment objective and strategy as the previous three ETFs, but its underlying index, the Deutsche X-trackers Emerging Markets Bond - Interest Rate Hedged ETF, is comprised of long positions in dollar-denominated government bonds issued by emerging market countries and short positions in U.S. Treasury notes or bonds.

Total annual fund operating expenses of 0.5% consist solely of a 0.5% management fee.

John Ryan and Rahmila Nadi are the portfolio managers.

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