Deutsche ETFs gain appeal

Johannesburg - Demand seems to be on the up for Deutsche Bank's X-tracker exchange-traded funds (ETFs) - which follow various global indices - after the financial services group made some sizeable new issuances.

Deutsche Bank issued six million new units for its DBX-World ETF on Friday. On Monday, it issued three million units for the MSCI Japan index ETF, as well as six million units for its DBX-US product.

Issuers of ETFs list and delist units in line with market demand.

"The volumes aren't big enough to be institutional investors, so what I think you are seeing is demand from retail investors," said Mike Brown of trading platform etfSA.

The X-tracker product series was launched in South Africa in 2008, but has seen muted demand from investors as the global financial crisis weighed on sentiment.

Brown said that while the product compares favourably to actively managed unit trusts from a cost perspective, it still has a relatively low profile. It does not spring to mind immediately when investors look to diversify their portfolios, but this seems to be changing.

"Deutsche Bank has a good product out there and I think what you are seeing indicates that people are diversifying their portfolios," he said.

Kari van Rensburg, product manager at Deutsche Bank, said a driver for the increase in demand was an expectation that the rand was likely to depreciate in coming months.

While the X-tracker product is aimed at giving investors access to international markets, it is priced in rands. This implies investors' gains will crimp when the rand strengthen against the dollar or pound sterling. The rand was one of 2009's best performing currencies.

- Fin24.com