Deutsche Asset & Wealth Management (Deutsche AWM), the exchange traded funds issuing unit of German bank Deutsche Bank AG (NYSE:DB), on Tuesday introduced what the first enhanced beta ETFs. The new ETFs from Deutsche AWM are the Deutsche X-trackers Russell 1000 Enhanced Beta ETF (NYSE: DEUS) and the Deutsche X-trackers FTSE Developed ex US Enhanced Beta ETF (NYSE: DEEF).
"DEUS tracks the Russell 1000 Comprehensive Factor Index, while DEEF tracks the FTSE Developed ex US Comprehensive Factor Index. Both FTSE Russell Comprehensive Factor indexes weight each stock within their respective underlying benchmark based on five academically-proven characteristics that influence the risk and performance of stocks," according to a statement issued by Deutsche AWM.
As is the case with some other new ETFs from well-known issuers, Deutsch AWM's new offerings employ a multi-factor approach that emphasizes value, momentum, quality, size and volatility.
The Deutsche X-trackers FTSE Developed ex US Enhanced Beta ETF holds more than 820 stocks, none of which command weights of over 1 percent. That new developed markets ETF is heavily tilted toward Japanese and British stocks as Japan and the UK combine for over 48 percent of the fund's weight. DEEF's third-largest country allocation is 9.15 percent to Australia.
DEEF, which charges a reasonable 0.35 percent per year, allocates 21.3 percent of its weight to financial services stocks and another 19.3 percent to the industrial sector. Consumer discretionary and consumer staples names combine for over 27 percent of the new ETF's weight.
The Deutsche X-trackers Russell 1000 Enhanced Beta ETF, Deutsche AWM's U.S.-focused offering, holds more than 840 stocks, only one of which commands a weight north of 1 percent. Top 10 holdings in the new ETF include AmerisourceBergen Corp. (NYSE:ABC), Southwest Airlines Co. (NYSE:LUV) and Costco Wholesale Corp. (NASDAQ:COST).
DEUS, which charges 0.25 percent per year, devotes nearly 19 percent of its weight to consumer discretionary names, this year's best-performing S&P 500 sector. Industrials and financials combine for another 31.6 percent, while technology and healthcare also garner double-digit allocations.
The indexes DEEF and DEUS follow "are factor weighted and not market cap weighted. The FTSE Russell methodology follows a simple, bottom-up approach that scores each stock based on each of the five factor characteristics and multiplies each stock's starting benchmark weight by the respective score. As a result, stocks exhibiting strong factor characteristics are given higher weights within the multi-factor index," according to Deutsche AWM.
Deutsche AWM is known to many U.S. investors for having one of the deepest lineups of currency hedged ETFs. Those funds have helped make the company one of the fastest-growing ETF issuers in the US with nearly fivefold asset growth since the end of 2014 and almost $21 billion in U.S. ETF assets under management as of the end of the third quarter.
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