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How does Deutsche's ETF securities lending fare against iShares?

by Emma Dunkley on Jan 28, 2013 at 12:19

How does Deutsche's ETF securities lending fare against iShares?

Deutsche Bank has started lending out the securities of its new, physically replicated exchange-traded funds (ETFs), returning a greater amount of revenue to the funds than its competitor, iShares.

Db X-trackers, which launched its first range of physically-backed ETFs at the end of last year, is returning more than 60% of the revenue gained from lending out the funds’ securities, surpassing iShares’ policy.

The issuer is returning 70% of the gross lending revenues to four of its ETFs, tracking the EuroStoxx 50, EuroStoxx 50 ex Financials, Nikkei 225 and FTSE 100 indices.

It is returning 90% of the revenue to its DAX ETF. In comparison, iShares returns 60% across the board, pocketing 40%.

The level of transparency offered on db X-trackers’ lending policy is also arguably superior to iShares’.

The firm is publishing on a daily basis the percentage of assets currently out on loan in each ETF, whereas iShares only shows the average and maximum amount of securities out on loan on a quarterly basis, with a one month lag.

Db X-trackers will also publish daily the maximum percentage of assets on loan in the past year – or since the fund’s launch, as well as the average percentage of assets on loan.

It will show the current percentage level of collateralisation, the breakdown of collateral type and the securities lending return.

The collateral assets received will be shown for each ETF and the list of borrowers will also be published.

For example, on the db X-trackers Euro Stoxx 50 Direct Replication product, the current percentage on loan amounts to 5.07% of the fund, while the collateral value as a percentage of the loan is 108.47%.

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1 comment so far. Why not have your say?

Andrew Whiteley via mobile

Jan 28, 2013 at 18:53

This is a welcome development as part of the DBX move into physical replication. Securities lending is not a bad thing per se and this increased level of disclosure should help to encourage the other main players to up their game.

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