On top of a pending multibillion-dollar mortgage settlement and speculation about a government bailoutbecause of capital pressure,Deutsche Bank AG continuesto experience heavy net client outflows in its exchange-traded funds.
Deutsche Bank's suite of 37 ETFs, excluding exchange-traded notes,that trade on a U.S. stock exchange lost an aggregate of approximately $6 billionin net client assets through the first nine months of 2016, including more than$2 billion in September alone, according to data from ETF.com.
Todd Rosenbluth, director of ETF Research at CFRA, blamed theoutflows on investor apathy in Deutsche Bank's niche — international equities thatare currency hedged.
"The dollar has not strengthened as it did in 2015, andinvestor confidence in Europe and Japan has weakened," Rosenbluth said. "DeutscheBank and WisdomTree Investments Inc.are being hurt by this trend,but Deutsche Bank is less diversified to U.S. equities where demand has been stronger."
Deutsche Bank's largest ETF, Deutsche X-trackers MSCI EAFE HedgedEquity ETF (DBEF), accounts for the bulk of the issuer's outflows. DBEF has shedassets for eight consecutive months. Its $2.07 billion in September outflows ismore than twice the amount it experienced in any other month this year. Financialsis the top sector of the fund with an allocation of approximately 20%, but is the lone financialentry in the top 10 holdings.
The next-largest fund, Deutsche X-trackers MSCI Europe HedgedEquity ETF (DBEU), has several similarities with DBEF, including redemptions foreach of the last eight months. Its worst month for flows, however, was August.
The most successful of the bank's funds at attracting new assetsin 2016 has been Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR).Even though ASHR has recorded returns of negative 12.2% through the first nine monthsof the year, the fund has experienced $142.0 million in asset inflows. Financialscomprise more than one-third of the fund's assets and eight of the top 10 holdings,led by Ping An Insurance (Group) Co.of China Ltd., China MinshengBanking Corp. Ltd. and IndustrialBank Co. Ltd.
The future of Deutsche Bank's ETF line of business is uncertain.Depending on the bank's capital position, Deutsche Bank may be forced to considerselling its asset management division.
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