Investing in China: Xtrackers Synthetic ETFs

The paper highlights opportunities via the synthetic ETF wrapper to access the China A-shares market to coincide with the launch of Xtrackers CSI 500 Swap UCITS ETF and attempts to provide some context on the following topics; A brief history of accessing the China onshore market synthetically, synthetic outperformance and China A-shares repo, repo curve drivers and the future evolution of China.

Investing in India: Bridging the allocation gap with passive market access

The index inclusion of Indian government debt is breaking new ground – it reignites global investor interest but poses allocation challenges that may make passive implementation a preferred route.

Fixed Income ETFs: From Evolution to Revolution

— The growth of Fixed Income ETFs is unstoppable. They have become an integral part of modern and efficient portfolio construction. The continued evolution of the ETF ecosystem has led to their emergence as a dependable anchor for allocations, driven by simplicity, diversification and reliability. — Granularity is becoming increasingly important. Fixed Income ETFs are poised for a more dynamic chapter, as fixed income yields are back and remain volatile. This opens up new tactical and strategic allocation solutions that have long been out of sight. ETFs will solve essential challenges along yield curves and make opportunities in credit investable. — This revolutionises the role Fixed Income ETFs play in asset allocation. The increasing depth and breadth of fixed income in portfolios also brings diversification considerations back on the agenda.

The Halving Hype — Decoding Bitcoin’s 2024 Halving

Bitcoin halvings, which occur roughly every four years, are highly anticipated events in the cryptocurrency ecosystem. With each halving, the number of new bitcoins issued per block is reduced by 50%. Thus, Bitcoin’s inflation rate is lowered, making Bitcoin a scarcer asset and increasing its attractiveness as a store of value over time. Halvings lead to nuanced technical and economic implications and were in the past fol- lowed by substantial bitcoin price increases. While halvings decrease Bitcoin’s new sup- ply and increase public attention, there are also security concerns due to decreased miner revenues. This halving differs from previous halvings and occurs during a time of changed macro- economic circumstances, greatly increased Bitcoin accessibility via ETPs, and expand- ing utility for Bitcoin, which leads to new revenue streams for miners.

A Bit of Bitcoin – Considerations for an Allocation

— According to financial site Trading View, cryptocurrencies now represent around 0.70% of the portfolio comprising all investable assets globally. Too big to ignore, they have earned their right to be considered by well-diversified investors. — The debate around cryptocurrencies is real, until it comes time to think about allocation. Then, it’s the data that matters. We use empirical data to formulate reasonable assumptions for return, risk, and correlation, and report the portfolio impacts that result. — Bitcoin and Ethereum have a role to play in the asset allocation process for well-diversified investors – not for risk reduction, but potentially for changing the balance of portfolio risks, or as Sharpe ratio enhancers.

The DWS Macro Metric Part II – Investment Grade

The credit cycle is a natural outcome of the business cycle, with corporate profits as its transmission channel. Investors can try to map the evolution of the credit cycle to inform tactical asset allocation in fixed income markets. We reinvoke the “DWS Macro Metric” - the ratio of Leading-to-Coincident Economic indicators - to see if we can glean any insights about the performance of investment grade (IG) corporate credit when the business cycle is inflecting from a trough. We find that, during the five upward inflections over the last fifty or so years, the subsequent 18-month performance of IG fixed income has been stronger than treasury securities of a similar duration, and by more than all the average 18-month returns. Finally, we show that the average outperformance is relatively stable to the timing around the inflection point, but that, helpfully to the investor, its volatility goes down as the inflection point is passed (allowing more certainty over its identification).

The DWS Macro Metric: Mapping Markets to Moves

- Understanding the business cycle in an economy is interesting, and important. It can provide insights into growth prospects (which are linked to corporate profits), likely policy paths, and inflation and unemployment. It can also inform Tactical Asset Allocation. - However, usual methods for evaluating the business cycle can produce volatile outcomes, and rely on data that is both released on too slow a cadence (typically quarterly), and with too many revisions. Such approaches are more helpful in theory than in practice. - In this paper, we build on the work of others to introduce the “DWS Macro Metric” (DMM), a simple gauge of the state of the economy that is based on intuitive, timely, and free, data, that captures the same spirit of business cycle analysis, and that helps us to map certain asset class moves. - Our view is that the DMM is on the turn (moving from a peak to a trough), and that this suggests a recession is imminent. We discuss the empirical evidence of how yield curves have tended to behave before, during, and after such recessions, and believe it’s the mid-point (around 5-year maturity) that currently makes most sense in both the US and Europe.

Navigating the climate index jungle – Climate benchmarks and their personalities

Climate has become the largest dedicated investment theme within the ESG universe and Net Zero is hard-wiring climate ambition into investment strategies. We explore the climate index benchmark jungle to reveal the trade-offs between carbon intensity reduction, decarbonization targets, tracking errors, sector exclusions, and whether or not investments are aiming to capture opportunities from the low-carbon transition.

EM Local Government Bonds – From de-dollarization to diversification

EM local bonds remain an "under-owned" and "under-appreciated" asset class at a time when access to diversified fixed income is more important than ever. Against a backdrop of slowing inflation and a weakening US dollar, foreign investors may want to reassess the asset class, which has undergone a significant transformation as underlying economies have matured, reduced their dependence on developed markets or raw materials exports.

2023 – The Great Re-Allocation

In 2023, investors are faced with the emergence of a new world order in the investment landscape, characterized by unprecedented challenges that require a more granular and selective approach to asset allocation. Three key peaks associated with globalization, inflation, and ESG are driving this shift. In this note, we focus on the ETF-minded investor and provide insight on how to capitalize on current market shifts and growth drivers.

Innovative technologies - End of a craze or start of a secular growth trend?

In an inflation-hit environment with mediocre growth prospects and high geo-political uncertainties, thematic ETFs could now, more than ever, provide a useful performance boost to core portfolios. In this brochure, we remind investors of the fundamental trends behind innovation growth stories, but also drill down into a possible breakdown of innovative technologies and show how innovation-focused investments could be integrated into investors’ portfolios depending on risk appetite.

Three tales of inflation: The Good, the Bad and the Ugly

Fuelled by the Covid recovery, monthly inflation figures have reached highs that were unheard of in the last twenty years. 2021 was arguably a textbook case of what could be called “good inflation”. For 2022 investors may consider inflation becoming more of an enemy than a friend. We revisit the conventional wisdom to assess the role of different asset classes in environments with rising inflation rates. Looking ahead, we suggest three representative scenarios, that already expressed themselves to some extent in 2021, and that could drive asset class returns against an inflationary background in the months to come.