Deutsche Bank has launched Asia's first money market exchange-traded fund (ETF). The db x-trackers US Dollar Money Market ETF, which was first listed in London in April 2008, was cross-listed in Singapore and Hong Kong yesterday.
With this latest listing, there are now 10 db x-trackers in Singapore and seven in Hong Kong. Deutsche Bank introduced its db x-trackers brand to Asia in February this year when it listed Asia's first inverse ETF in Singapore and expects to have around 30 additional listings in the region within the next 12 months.
The db x-trackers US Dollar Money Market ETF tracks the Fed Funds Effective Rate Total Return Index, which is intended to reflect the performance of a deposit earning the United States Federal Funds Effective Rate interest at daily rest (calculated daily). The Fed Funds Effective Rate represents the weighted average interbank interest rate in the US. Thus, the ETF provides investors with access to the overnight US dollar money market at an all-inclusive annual fee of up to 0.15%.
ETFs are traded on an exchange just like a stock. An ETF holds assets such as stocks or bonds and trades at around the same price as the net asset value of its underlying assets over the course of the trading day. Some ETFs track an index, while others are custom-made to track specific assets. Investors usually like ETFs for their low costs and stock-like features -- cheap, liquid beta -- although in Asia, their uses as sophisticated portfolio construction tools have yet to catch on.
In the last couple of years, ETFs were seen as more of a passive, market-access product. But ETFs are now increasingly becoming investment solutions.
The db x-trackers US Dollar Money Market ETF can serve as a cash management tool for investors, brokers and fund managers.
"The addition of this US dollar money market ETF demonstrates a new range of access products available through an ETF structure, extending beyond traditional asset classes such as equities, fixed income and commodities," says Janice Kan, senior vice-president and head of product development at the Singapore Exchange.
The db x-trackers US Dollar Money Market ETF has a credit rating of Aaa and a market risk rating of MR1 assigned by Moody's. Based on Moody's rating definition, this top credit rating is based on the credit quality of the fund's investments, the quality of the investment management process exhibited by the investment adviser and the manager's operations, including its compliance function.
Today's listing follows the introduction of other market firsts by db x-trackers in Asia, including the region's first inverse ETF, which was listed on SGX in February 2009 and Singapore's first Vietnam equity ETF, listed on SGX the following month.
With the launch of this latest ETF, Singapore now has 39 ETFs, while Hong Kong has 31.
db x-trackers was also the first ETF provider to launch a money market ETF in Europe, with its EONIA Euro money market ETF that was launched in June 2008.
db x-trackers began offering innovative ETF products to European investors in January 2007. With more than 100 ETFs covering various asset classes including equity, fixed income, credit, money market, currencies and commodities, db x-trackers has more than $31 billion of ETF assets under management.
In Singapore, other db x-trackers are the S&P 500 Short ETF, which is Asia's first "inverse" ETF. This tracks the S&P500 Index, but in the opposite direction. Investors who expect the S&P500 Index to fall can buy this ETF, as it is based on the short index which will rise when the main index falls. The other ETFs are the MSCI Taiwan TRN Index ETF, the FTSE/Xinhua China 25 ETF, and the S&P CNX Nifty ETF.
In Hong Kong, other db x-trackers are the MSCI USA Total Return Net Index ETF, FTSE/Xinhua China 25 ETF, S&P CNX Nifty ETF, MSCI Korea TRN ETF, MSCI Taiwan TRN Index ETF, and FTSE Vietnam ETF.