Xtrackers switches an emerging markets ETF to active management

Deutsche Asset Management is changing the investment policy of an Xtrackers ETF so the fund will offer actively managed emerging markets equity with a target ex-ante tracking error of 1% to 1.5%.

The product is the Xtrackers Emerging Markets Equity Enhanced Active ETF, benchmarked to the MSCI Emerging Markets 10/40 Index, which covers large- and mid-cap companies in emerging markets. ETF Express first reported the change.

For advisors, the change means an emerging markets allocation now carries active stock selection with a 1% to 1.5% tracking error, so returns can diverge modestly from the index. The expense ratio was not disclosed.

The fund is rebalanced monthly and run within clearly defined risk parameters, according to the firm.

The fund runs on DWS's systematic equity strategies, which the firm says have been applied for more than 20 years. The Qi Research & Investment Team has used a systematic, multidimensional equity analysis since 2001, weighing fundamental and technical indicators to judge the relative attractiveness of individual stocks in the universe. Deutsche Asset Management says the strategy targets consistent excess return over the benchmark while managing risk against it.

"Our approach combines innovative alpha research through the analysis of large data sets using data science methods with risk-conscious portfolio construction," said Dr. Irina Sidorovitch, head of Qi quantitative investments at Deutsche Asset Management.

Deutsche and Pictet put active strategies in front of European intermediaries without publishing what they cost, as Private Wealth Daily previously reported.

The fund joins the Xtrackers Equity Enhanced Active series, which the firm says applies the same systematic process across other benchmarks.