Xtrackers to offer actively managed emerging-markets ETF

Deutsche Asset Management is changing the investment policy of an Xtrackers ETF. Under the revised policy, the fund will offer actively managed emerging-markets equities and use the MSCI Emerging Markets 10/40 Index as its benchmark.

The Xtrackers Emerging Markets Equity Enhanced Active UCITS ETF will invest in large- and mid-cap stocks across emerging markets. The portfolio will use active stock selection while remaining closely aligned with the benchmark. The index is designed to limit the weight of individual companies and company groups.

The strategy is based on DWS’s systematic equity approach, which has been used for more than 20 years. The firm’s Qi Research & Investment Team evaluates stocks using fundamental and technical indicators to assess their relative attractiveness within the investment universe.

The portfolio will be actively managed and rebalanced monthly within defined risk limits. It targets an ex-ante tracking error of 1% to 1.5%. Tracking error measures the expected difference between the ETF’s returns and those of its benchmark.

The strategy seeks to generate excess returns, or alpha, relative to the MSCI Emerging Markets 10/40 Index while managing risk against the benchmark. Deutsche Asset Management said the ETF structure provides daily tradability and portfolio transparency.

“With the Xtrackers Emerging Markets Equity Enhanced Active ETF, we offer investors an active approach to emerging-market equities that can serve as a core component for individual asset allocation in this region,” Michael Mohr, global head of public products and wealth solutions at Deutsche Asset Management, said.

The approach combines analysis of large data sets using data-science methods with risk-focused portfolio construction, according to Irina Sidorovitch, head of Qi Quantitative Investments at Deutsche Asset Management. She said the ETF extends the firm’s experience in active quantitative portfolio management to emerging-market equities.