Deutsche offers first yield enhancement fund to Asian retail investors

Deutsche Bank has begun offering Singaporean retail investors access to a new Luxembourg-based yield enhancement fund. The move marks the first public offering of a structured fund under the Xavex brand, the Luxembourg-based asset managment entity of the bank, in Asia.

“This is an important transaction for Singapore in that it demonstrates the continued maturation of the type of structures being brought to the market," said Loh Boon-Chye, head of Deutsche Bank’s global markets in Asia.

Investing in high-quality bonds of entities rated Aa/AA or Aaa/AAA, the fund then swaps the returns - using a total return swap where Deutsche acts as the counterparty - for exposure to 25 diversified investment-grade names across the US, Europe and Asia. The risk for the retail investors is only to the 25 diversified investment-grade names.

The fund, which matures in four and a half years, is also denominated in Singapore dollars, with all payments made in local currency.

“We have adopted the strategy of globalising our structured product platform, which has met with tremendous success in Europe, since 1998," said Ricardo Honegger, Deutsche's head of global equity derivatives, Asia-Pacific. "The Asian region represents an important phase of the rollout of that platform to other parts of the world. This will be our first public offering of a structured fund under the Xavex brand in Asia," he added.

AIG International Funds (Singapore) will market the fund, which requires a minimum investment of SGD1,000 ($570).