Deutsche Bank has launched an exchange traded fund that captures the returns reflected in an index of hedge funds, which the German bank claims is a ground-breaking product.

The hedge fund ETF, which complies with UCITS III fund rules, is linked to the db Hedge Fund Index. The index, which is a proprietary Deutsche Bank index, captures the returns of core hedge fund strategies such as equity hedge, market neutral, credit and convertible, systematic macro and event driven.

ETFs, which are listed and traded like individual stocks, enable investors to track indices of equities, bonds, commodities and other asset classes without the investor having to hold the underlying index components. ETFs have expanded rapidly in asset size and quantity in recent years.

“For investors wanting access to hedge fund returns, this ground breaking ETF offers unprecedented transparency as well as intra day liquidity compared to at best monthly or even quarterly liquidity for a traditional hedge fund investment,”Stephane Farouze, global head of hedge fund derivatives at Deutsche Bank, said.

All hedge funds on the managed account platform are Jersey unit trusts listed on the Irish Stock Exchange and managed and administered by legally separate Deutsche Bank affiliates.

Third party hedge fund managers are sub-contracted to each platform fund as a trading advisor and their responsibility is to manage the portfolio for a given fund. 

The ETF on the db Hedge Fund Index carries an annual management fee of 0.9 per cent and is listed on the Frankfurt Stock Exchange.