REFILE-Deutsche Bank to launch muni ETF for infrastructure

Fri May 31, 2013 5:10pm EDT

By Hilary Russ

NEW YORK May 31 (Reuters) - The asset and wealth management division of Deutsche Bank will launch next week a first-of-its kind exchange-traded fund devoted purely to infrastructure-related municipal bonds.

The fund, called db X-trackers Municipal Infrastructure Revenue Bond Fund, will carry the ticker "RVNU" on the NYSE and is the first muni ETF to hold exclusively infrastructure bonds.

By pulling the ETF away from potentially riskier kinds of muni bonds, "it makes it a bit more of a defensive play," said Jeff Tjornehoj, a senior research analyst at Lipper, a unit of Thomson Reuters.

"A lot of the offerings in this space are quite small, so it remains to be seen how well this idea will be received," he said.

Lipper lists 29 municipal bond ETFs, none of which are entirely focused on infrastructure.

Overall, there is less than $12.5 billion in muni ETFs. The largest such fund is iShares S&P National AMT-Free MUB ETF at about $3.6 billion.

A spokesman for Deutsche Asset and Wealth Management said that managers could not discuss details of the fund until after it launches on Tuesday.

Underlying the fund is the DBIQ Municipal Infrastructure Revenue Index, designed to track federal, state and local infrastructure projects, including water and sewer systems, public power systems and toll roads and bridges, according to a U.S. Securities and Exchange Commission filing in February.

Many such projects are considered essential services that people cannot do without, and they usually generate their own revenue. The bonds used to finance the projects are sometimes considered safer than other forms of municipal debt for those reasons.

Many muni ETFs already contain infrastructure bonds, so Deutsche Bank could be trying to tap into an emotional yearning among investors to help rebuild aging U.S. infrastructure, said Timothy Strauts, a senior fund analyst at Morningstar.

"People will maybe be more likely to buy it because they feel like they're helping the country out," he said.

"If they just launched a regular national muni fund, it's unlikely that it would take off. There's already established players out there doing it," he said. "It's unlikely that Deutsche Bank is going to try to compete on cost, and they definitely can't compete on size."