Deutsche Bank will be using PlusFunds' SPhinX investment program to hedge in part its exposure to the Dynamic Alternative Portfolio Fund.
The Deutsche Bank Dynamic Alternative Portfolio Fund is currently being offered to European investors.
The product is designed to track the performance of a proprietary Deutsche Bank index, the Deutsche Bank Dynamic Alternative Portfolio Index. This index includes a 60% allocation to the hedge fund strategies, in addition to foreign exchange derivatives and commodities.
The allocation to hedge funds will be represented by the performance of various indices in the S&P Hedge Fund series, including the S&P Hedge Fund Index, the S&P Event-Driven Index, the S&P Arbitrage Index and the S&P Directional/Tactical Index.
Deutsche Bank chose the SPhinX investment program due to its low tracking error with the various S&P hedge fund indices, as well as its risk management and transparency platform.
Sunil Beri, Director of Deutsche Bank, said: "For a fund-linked product, the DB Dynamic Alternative Portfolio Fund is unprecedented. We are able to offer our investors daily liquidity at Net Asset Value on an underlying asset that is traditionally illiquid, as well as the benefit of a UCITS-compliant vehicle which allows us to market the product on a pan-European basis."
Gabriel Bousbib, Chief Executive of PlusFunds, said: "We are delighted to be working with Deutsche Bank to help make hedge fund investments more accessible to a broad range of investors. The Deutsche Bank Dynamic Alternative Fund gives investors euro-denominated access to an important source of return potential and in unusually low investment denominations. It also offers optimized tax treatments for German investors."
Chris Sugrue, Chairman of PlusFunds, said: "Deutsche Bank's willingness to offer daily liquidity on the product proves the value of transparency and the several other risk-related merits of PlusFunds' investment platform."
Deutsche Bank's Dynamic Alternative Portfolio Fund allows private investors to gain access via a single fund to different alternative asset classes. Within that investment universe, the asset classes are dynamically allocated with the goal of achieving attractive absolute returns over time.
The initial asset allocation includes hedge funds, commodities and currencies. Exposure in each case is by reference to indices, which reflect the performance of the relevant asset class. The objective of dynamic allocation is to generate absolute returns while controlling the risk within the rules governing the Deutsche Bank Dynamic Alternative Portfolio Index.