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Deutsche Bank has launched a Ucits III compliant equity fund which aims to reduce volatility and drawdowns by implementing an enhanced option strategy.

In comparison to a long-only equity investment, the fund, called DB Platinum Option Overwriting Plus Fund, benefits from traditional call overwriting strategies but also uses additional protection features on the downside and has some increased participation potential on the upside.

The fund is aimed at institutional investors and tracks the db Option Overwriting Plus Index strategy, which invests 100 per cent in a benchmark index - DJ Euro Stoxx 50, DAX or SMI - and enters into exchange-traded option contracts on the corresponding price return benchmark index.

Every month the strategy evaluates two separate signals with a view to predict the future direction of the underlying index: price momentum is based on a comparison of short-term and middle-term performance; and implied market volatility as materialised by the VStoxx Index (Dow Jones Euro Stoxx 50 Volatility Index).

These signals are based on the intrinsic behaviour characteristics of equity markets: upward trends are usually accompanied by lower volatility (except in bear market rally situations) while bear markets experience higher volatility. Using these signals, the index aims to adapt its option positions for different market behaviours.

Amit Bordia, global head of equities structuring at Deutsche Bank, says: “Despite the uncertainty surrounding equity markets, investors are looking for interesting and performing products. The Option Overwriting Plus fund is another example of Deutsche Bank’s commitment to meeting our clients needs.”


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