In a note to investors, Deutsche Asset Management explained that its UCITS and exchange-traded fund (ETF) sub-funds will switch from an 'indirect investment policy' to a 'direct investment policy', with optimised index replication.
This will include “entering into securities lending transactions as more fully described in the prospectus”. The asset manager also clarified that cash collateral gained from lending may be reinvested if possible.
Currently, each sub-fund is exposed to the performance of its relevant current reference index by way of derivatives transactions such as individually negotiated over-the-counter swaps deals.
Under the new strategy, the sub-funds will direct buy a portfolio of debt securities that may comprise of the constituents of its new reference index, unrelated transferable securities or other eligible assets.
Deutsche Asset Management will also bring the management of these funds in-house. State Street Global Advisors currently acts as investment manager for the sub-funds.
Additionally, Deutsche Asset Management has updated its list of sub-funds that will be listed on the London Stock Exchange.
The firm will now host 16 index tracking funds on the exchange, including an Australian dollar-UCITS ETF.