researchglobal 10 2 2012 - ETFs - Deutsche Bank

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10 February 2012 Global ETF & ETC/V DirectoryField Abbreviation Applies to Example/DefinitionStructure 5 All ETPsETF 2L means that the ETF aims to generate Double returnsemploying a Long strategy.Possible values for each component:Structure: ETF, ETV, ETCLeverage Factor: 1, >1 (no specific multiple), 2, 3…Strategy Impact: L (Long), S (Short), LS (Long Short)Tenor 6 B, MM, S, M, L Fixed IncomeETPsCredit Rating 7 HY, IG, M Fixed IncomeETPsInflation Linked 8 N, Y Fixed IncomeETPsReplication Type 9 Physical, Synthetic CommodityETPsSource: Deutsche BankB (Broad), MM (Money Market), S (Short Duration), M(Medium Duration), L (Long Duration).HY (High Yield), IG (Investment Grade), M (Mixed)N (No), Y (Yes)The replication strategy used by the ETP in order to track itsbenchmark.DefinitionsTermTER 2Turnover 3AUM 4DefinitionTotal Expense Ratio (or TER) is the overall cost borne by a fund’s share holder for a 1 year ownership period. Itusually includes the management fee and other expenses paid by the fund. TER is, in general, expressed as apercentage of the amount invested and it is proportionally discounted according to the actual holding period.Daily Turnover for the ETP totaled for the calculation month. Daily turnover is calculated as daily shares traded onexchange times end of day price.Assets Under Management (or AUM), are dated as of the last business day of the calculation month. Generally,Daily AUM is computed by multiplying end of day shares outstanding by the end of day NAV. When NAV is notavailable, Price is used as a proxy.Exchange-Traded Products (ETPs)We define an exchange-traded product (ETP) as a secure (funded or collateralized) open-ended delta-one exchange-tradedequity or debt instrument with no embedded optionality and market-wide appeal to investors. This includes exchange tradedfunds, exchange-traded commodities (Europe) and exchange-traded vehicles (US).Figure below gives a summary of our current coverage universe by region and structure type as on 31 December 2011.The vast majority of instruments are ETFs (90.8%, 3,016 products, $1,354.3 billion) with the remainder being ETCs (1.9%, 337products, $28.1 billion) in Europe and ETVs (7.2%, 73 products, $107.1 billion) in the US.Figure 1: ETP Coverage Universe Summary | ETPs | Global |Region Products US$ Mil. % Products US$ Mil. % Products US$ Mil. %US 1,166 1,045,919 70.1% 1,093 938,799 62.9% 73 107,120 7.2%Europe 1,574 297,948 20.0% 1,237 269,888 18.1% 337 28,060 1.9%Asia Pacific 398 90,695 6.1% 393 90,023 6.0% 5 672 0.0%RoW 294 57,604 3.9% 293 55,583 3.7% 1 2,021 0.1%Global 3,432 1,492,166 100.0% 3,016 1,354,293 90.8% 416 137,873 9.2%Source: Deutsche Bank, Bloomberg Finance LP, Reuters.ETPs ETFs ETCs (Europe), ETVs (US)Page 4Deutsche Bank AG/London
10 February 2012 Global ETF & ETC/V DirectoryExchange-Traded Funds (ETFs, 91%)US (63%): Fund structures that issue shares that are traded on an exchange much the same way as equities. ETFs indexed toequity and fixed income benchmarks are registered under the investment company act of 1940. Only physical indexreplication techniques are permissible by this legislation while synthetic replication is not allowed.Europe (18%): Fund structures that issue units or shares that are traded on an exchange much the same way as equities. Thevast majorities of European ETFs are UCITS III compliant and are primarily domiciled in Dublin and Luxemburg. TheUndertakings for Collective Investment in Transferable Securities (UCITS) are a set of European Union directives that aim toallow collective investment schemes to operate freely throughout the EU on the basis of a single authorization from onemember state. Both physical and synthetic index replication is permissible by UCITS and funds are allowed to track equity,fixed income as well as diversified commodity indices.Asia (6%): Both European and US ETFs are cross sold into the Asian market.Exchange-Traded Collateralized Instruments (9%)Exchange-Traded Commodities (ETCs, 2%)In Europe as UCITS III does not permit the creation of funds tracking non diversified commodity indices (for example wheat oroil), exchange-traded products that track single commodity profiles are issued under the EU Prospectus Directive in twostructures that have become widely known as exchange-traded commodities (ETCs). ETCs can either be physically backed orthey can be issued through a bankruptcy remote special purpose vehicle (SPV). Both forms utilize offshore domiciles, such asJersey, and are classed as debt instruments. Physically-backed ETCs are fully backed with securities that closely resemble thecomposition of a product’s benchmark index. SPV structures are collateralized by assets which could bear no resemblance tothose of their respective benchmark index and ensure replication of their index return through a total return swap structure orby holding other derivative instruments such as futures. In the vast majority of cases, both types of ETCs are fullycollateralized with secure assets such as money market instruments, government bonds and gold. For more information,please refer to our research report issued on March 11 2010 titled ‘The race for assets in the European Exchange-TradedProducts Market”.Exchange-traded vehicles (ETVs, 7%)This terminology typically refers to grantor trusts that exist in the US market. These instruments track primarily commoditybenchmarks. They differ from ETFs in that they are registered under the Securities Act of 1933 and not the investmentCompany Act of 1940, hence they are not classed as funds. Vehicles that replicate commodity benchmarks, more oftenknown as pools, and funds targeting alternative index returns are formed under the Commodities Exchange Act and are listedunder the 33 Securities Act, and report under 34 Corporate Act.Deutsche Bank AG/London Page 5
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