Deutsche Bank rolling out Newcits

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Deutsche Bank plans to launch an alternative Ucits III fund every three weeks, it says.

The bank’s Ucits platform, db funds, is in discussions with hedge fund clients and expects to roll out 15 alternative mutual funds over the next few months.

Currency specialist Ikos and German CTA manager AIMhedge are the next two managers db funds will help to launch Newcits products. The German bank has already rolled out funds for hedge funds QCM and Toscafund.

Manfred Schraepler, head of db funds, says: “We’re leveraging the investment bank to bring new strategies to investors. We’re talking to a number of managers.”

The db funds platform sits in the global market division of the German bank. It was first created to operate an internal Ucits commodity fund, but it was later decided to use the platform to launch products for external clients.

“I always thought we had this wonderful platform, but in 2007 or 2008 there was no interest in Ucits. In 2009, we decided to partner with our hedge fund clients,” adds Mr Schraepler.

Deutsche is the latest investment bank to try to gain traction in the growing Newcits market, which attracted £79bn (€92bn, $115bn) of assets last year, according to data from SEI.

Bank of America Merrill Lynch has also for some time been providing Ucits operational support to well-known alternative managers, such as BlueCrest Capital Management. BoA Merrill Lynch recently said it had six Newcits funds in the pipeline, including an FX and an Asian long/short product. Earlier this month, it launched a Newcits long/short equity fund for New York-based hedge fund Zweig DiMenna.

Other initiatives include those of Credit Suisse and JPMorgan.

Despite the competition, db funds says it is not worried about coming late to market, believing there is no such thing as a first-to-market advantage with Newcits.

Mr Schraepler says: “It’s more about quality than being late or not.

“We have to be patient. We believe that in 2011 you’ll see the funds that really work and those that don’t.”

Experts believe there is a good fit between investment banks and their hedge fund clients.

Robert Howie, a principal in the hedge fund research team at Mercer, says: “[Investment banks] can help hedge funds to raise assets; it helps their business as well.

“If hedge funds are successful at raising assets, [bank] fees from those assets obviously increase as well.”

Db funds says it has not yet provided seed capital to any of its hedge fund partners, but that it is “open to discussions”.

In terms of distribution, Mr Howie says investment banks have ‘introduction teams’ that can pair hedge funds with potential investors.

Alternative managers can also expect to be put in touch with the banks’ wealth management arms. Deutsche organises road shows and provides marketing help for its hedge fund clients.

Distribution, however, remains a big concern for hedge funds that lack experience in the retail market. According to analysis by New York-based consultancy Strategic Insight, Newcits launched by hedge funds often fail to collect significant assets.

Mr Schraepler admits that db funds’ proposal is mostly about setting up Newcits, and less about distributing them.

Baptiste Aboulian is associate editor of Ignites Europe, a Financial Times publication, where this article first appeared

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