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Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-184193
Dated November 16, 2012
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Powershares Oil: A Mean Reverting Strategy to Trade Crude Focusing on Oil November Volume, Flows and AUM Monthly Trends and Top Performers Notebook Invesco PowerShares ETN Monthly Report November 2012 | Data as of Oct. 31, 2012 A Mean Reverting Strategy to Trade Crude Oil NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE FOR US INSTITUTIONAL INVESTOR USE ONLY - NOT FOR USE WITH THE PUBLIC |
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A Mean Reverting Strategy to Trade Crude Oil Although oil has unique drivers to its price, over the last decade oil has increasingly tended to move generally in line with equity markets as both are largely driven by economic growth. Due to this relationship, we believe using mean reversion analysis can be a useful exercise to value one asset class to another. When oil is trading below average discounts to US equities;, oil tends to outperform for some period of time going forward. Conversely, when oil is trading above average premiums to US equities, oil tends to underperform for some period of time going forward. Although there is no guarantee the two markets will always follow this pattern, it seems to be an illustration of two asset levels converging towards their respective longer-- term averages. Although in the majority of observed periods oil and US equities tended to trade at small premiums or discounts to the long--term average ratio, there were times when the two markets traded well outside the long--term average ratio. In environments where these dislocations between oil prices and US equities are significant, we believe entering into a mean reverting pairs trade may be worth considering. Oil to US Equities Ratio [GRAPHIC OMITTED] Oil is represented by spot and US equities by the SandP 500([R]) Index Source: Bloomberg L.P., as of Oct. 31, 2012 To illustrate markets which we consider to be highly dislocated relative to the long-term average, we have highlighted those periods in the graphs on the next page. Although past performance over a decade is certainly not indicative of future results, these dislocations have been selected because, though they have only existed less than 8% of the time over the last 10-years, in that period there has been no forward looking three-month period in which a notional mean reversion trade at these levels of dislocation would not have ended in producing a positive return. Note: Analysis in this piece examined daily rolling 5-year ratios of spot oil prices to the SandP 500 Index and subsequent forward daily rolling 60-day period returns of oil prices from Oct. 2002 through Oct. 2012. The trades in this piece do not account for any potential transaction costs. Invesco PowerShares For US Institutional Investor Use Only Notebook: ETN Report Not for use with the public |
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Distribution of Historical Oil to U.S. Equities Valuations [GRAPHIC OMITTED] Oil is represented by spot and US equities by the SandP 500 Index Source: Bloomberg L.P., as of Oct. 31, 2012 By this, we mean that when oil has looked expensive relative to US equities (the left side of both charts), a short oil, long US equities notional trade over the ensuing three months would have produced a positive return in all cases. Similarly, when oil has looked cheap relative to US equities (the right side of both charts), a long oil, short US equities notional trade over the ensuing three months would also have produced a positive return in all cases. Over that 10-year period, these notional trades would have averaged 22%. Today, using the same analysis, we feel oil may be relatively undervalued to US equities. As of the end of October 2012, oil was trading at a 19% discount to its five-year average ratio to US equities. At these discount levels, retrospective analysis over the last 10 years shows oil has outperformed US equities by an average of 18% over the following three months and a notional mean reversion trade that is long oil and short US equities would have generated positive returns in all cases. However, past performance is not indicative of future performance, and there can be no guarantee that markets will behave in a way that such mean reversion trades would generate positive returns rather than losses. Trading Oil Relative to US Equities at Extreme Valuations [GRAPHIC OMITTED] Oil is represented by spot and US equities by the SandP 500 Index Source: Bloomberg L.P., as of Oct. 31, 2012 Considering today's relatively large discount of oil to US equities, we believe a long oil, short US equities trade may be worth considering. Although, the markets are constantly evolving, relative valuation techniques between major asset categories may be a great way to monitor the overall health of the market and possibly identify potential trading opportunities. PowerShares DB ETN Oil Solutions DTO PowerShares DB Crude Oil Double Short ETN SZO PowerShares DB Crude Oil Short ETN OLO PowerShares DB Crude Oil Long ETN Note: Analysis in this piece examined daily rolling 5-year ratios of spot oil prices to the SandP 500 Index and subsequent forward daily rolling 60-day period returns of oil prices from Oct. 2002 through Oct. 2012. The trades in this piece do not account for any potential transaction costs. The opinions expressed are those of the author, are based on current market conditions as of the date of this report and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. Data from Bloomberg L.P., as of Oct. 31, 2012 unless otherwise noted 3 |
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October 2012
Exchange-traded note (ETN) Trading Volume
10 Products with Highest Volume in October ($M)
Ticker Name ADTV Amount Daily
Outstanding Turnover
------ ------------------------------------------ ----- ----------- --------
VXX iPath SandP 500 VIX Short-Term Futures $849 $1,629 52%
XIV VelocityShares INV VIX Short-Term $195 $327 60%
------ ------------------------------------------ ----- ----------- --------
USLV VelocityShares 3x Silver ETN $27 $117 23%
AMJ JPMorgan Alerian MLP $26 $5,239 1%
------ ------------------------------------------ ----- ----------- --------
VXZ iPath SandP 500 VIX Mid-Term Futures $22 $128 17%
TVIX VelocityShares Daily 2x VIX Short Term $13 $183 7%
------ ------------------------------------------ ----- ----------- --------
OIL iPath Goldman Sachs Crude Oil Total Return $12 $409 3%
DTO PowerShares DB Crude Oil Double Short $11 $59 19%
------ ------------------------------------------ ----- ----------- --------
DGP PowerShares DB Gold Double Long $11 $499 2%
UGAZ VelocityShares 3x Long Natural $9 $24 40%
ETN Volume
$26.4 Billion
$26.4 billion traded in ETNs during October up 41% from last month.
ETN Top Volume Categories in October
[GRAPHIC OMITTED]
Most Traded ETN Product Type
Volatility
In October, volatility-based ETNs made up 85% of total ETN dollar volume
traded.
Monthly ETN $ Volume
[GRAPHIC OMITTED]
Invesco PowerShares For US Institutional Investor Use Only
Notebook: ETN Report Not for use with the public
-2-
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October 2012
ETN Assets and Net Flows
Total ETN Assets
$17.3 Billion
ETN assets. In October, total assets in US- listed ETNs were down 2.3%,
decreasing by $411 million to $17.3 billion.
ETN net flows. ETN flows were negative in October with a total net out[]ow of
$27 million. The largest inflows went to inverse volatility and master limited
partnership (MLP) based products, with $99 million and $47 million in inflows
respectively. October ETN outflows were led by volatility and commodity
products with $144 million and $45 million in outflows respectively.
Product-related news.
October brought two new ETNs to the market, with the launch of Barclays ETN +
Shiller CAPE ETN (CAPE) and ETRACS Monthly Pay 2x Leveraged Mortgage REIT ETN
(MORL).
By Investment Objectives (Ranked by October Net Flows)
Amount Outstanding -- $M Net Flows -- $M
#ETNs 10/31/12 []Oct. []YTD Oct. []YTD
----------------------------------- -------------- ------ ----------- ---- -----------
Inverse Volatility 4 343 78 -129 99 -484
MLPs 8 6,152 57 1,912 47 1,663
----------------------------------- ------ ------- ------ ----------- ---- -----------
Real Estate 2 30 19 30 18 28
US Equity 30 882 -6 404 17 355
----------------------------------- ------ ------- ------ ----------- ---- -----------
Inverse Precious Metals 6 63 17 -11 9 3
Inverse International/Global Equity 2 15 4 1 4 4
----------------------------------- ------ ------- ------ ----------- ---- -----------
Inverse US Equity 3 23 6 -28 4 2
Inverse Sovereign Debt 9 239 5 118 2 146
----------------------------------- ------ ------- ------ ----------- ---- -----------
Sovereign Debt 11 216 2 41 0 2
Inverse Absolute Return 2 37 -1 -17 0 -13
Inverse MLPs 1 7 0 -4 0 -3
International/Global Equity 6 470 -23 -3 -3 -98
----------------------------------- ------ ------- ------ ----------- ---- -----------
Inverse Commodity 13 178 7 -84 -6 -78
Currency 12 157 -7 -77 -6 -74
----------------------------------- ------ ------- ------ ----------- ---- -----------
Absolute Return 10 236 -13 -111 -8 -98
Precious Metals 12 832 -87 143 -16 59
----------------------------------- ------ ------- ------ ----------- ---- -----------
Commodity 66 5,100 -275 -504 -45 -443
Volatility 8 2,274 -58 848 -144 3,882
----------------------------------- ------ ------- ------ ----------- ---- -----------
Totals 205 17,256 -276 2,530 -27 4,852
By Provider (Ranked by October Assets)
Amount Outstanding -- $M Net Flows -- $M
#ETNs 10/31/12 []Oct. []YTD Oct. []YTD
------------------------ -------------- ------ ----------- ---- -----------
iPath 69 6,110 -297 69 -189 2,143
JP Morgan 3 5,253 20 1,599 - 1,363
------------------------ ------ ------- ------ ----------- ---- -----------
ELEMENTS 11 1,111 -47 -57 0 -62
------------------------ ------ ------- ------ ----------- ---- -----------
PowerShares DB 32 1,170 -59 24 -38 -80
------------------------ ------ ------- ------ ----------- ---- -----------
E-TRACS 34 1,092 57 254 88 199
VelocityShares 22 784 91 123 119 773
------------------------ ----- -------- ------ ----------- ---- -----------
Credit Suisse Asset Mgmt 5 429 -8 24 -6 27
Barclays 9 413 -8 164 -6 170
------------------------ ----- --------- ----- ----------- ---- -----------
Goldman Sachs 2 255 -12 181 - 177
UBS 2 233 -3 139 8 131
RBS 8 199 -1 74 4 62
Morgan Stanley 6 141 -9 -59 -7 -60
------------------------ ----- --------- ----- ----------- ---- -----------
Citigroup 1 6 1 -4 1 8
Keynotes 1 4 0 0 - -
------------------------ ----- ------- ------ ----------- ---- -----------
Totals 205 17,256 -276 2,530 -27 4,852
The net flow numbers by ETN sponsors is an approximate calculation based on
outstanding number of ETNs and repurchase value available on Bloomberg. []
represents change.
Data from Bloomberg L.P., as of Oct. 31, 2012 unless otherwise noted
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October 2012
10 Products with Highest Net Inflows in October ($M)
Ticker Name Flows Ending
Amount
------ -------------------------------------------------- ----- -------
XIV VelocityShares INV VIX Short Term 101 327
MLPI UBS E-Tracs Alerian MLP Infrastructure ETN 34 424
------ -------------------------------------------------- ----- -------
MORL E-Tracs Monthly Pay 2x Leveraged Mortgage REIT ETN 18 19
USLV VelocityShares 3x Silver ETN 15 117
------ -------------------------------------------------- ----- -------
OIL iPath Goldman Sachs Crude Oil Total Return 14 409
MLPG UBS E-Tracs Alerian Natural 12 27
------ -------------------------------------------------- ----- -------
SGG iPath Dow Jones-UBS Sugar Sub Total Return ETN 12 40
BDCL E-Tracs 2x Wells Fargo BDCI 10 67
------ -------------------------------------------------- ----- -------
JO iPath Dow Jones-UBS Coffee Sub Total Return 9 42
UCI E-Tracs UBS Blooberg CMCI 9 153
ETN with Highest Net Inflows in October
XIV
VelocityShares INV VIX Short Term
$101 Million
10 Products with Highest Net Outflows in October ($M)
Ticker Name Flows Ending
Amount
------ ------------------------------------------------- ----- -------
VXX iPath SandP 500 VIX Short-Term Futures -151 1,629
JJG iPath Dow Jones-UBS Grains Sub Total Return -31 121
------ ------------------------------------------------- ----- -------
DGP PowerShares DB Gold Double Long -29 499
OLEM iPath Pure Beta Crude Oil -17 4
------ ------------------------------------------------- ----- -------
DTO PowerShares DB Crude Oil Double Short -10 59
DJP iPath Dow Jones-UBS Commodity Total Return -10 2,015
------ ------------------------------------------------- ----- -------
VQT Barclays ETN + SandP VEQTOR ETN -9 353
JJA iPath Dow Jones-UBS Agricultural Sub Total Return -9 108
------ ------------------------------------------------- ----- -------
UGAZ VelocityShares 3x Long Natural -8 24
VIIX VelocityShares VIX Short Term -7 9
ETN with Highest Net Outflows in October
VXX
iPath SandP 500 VIX Short-Term Futures
$151 Million
Invesco PowerShares For US Institutional Investor Use Only
Notebook: ETN Report Not for use with the public
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October 2012 Most Traded ETN Product Type Appendix Putting issuer credit risk in perspective: sovereign entity credit risk versus ETN issuer credit risk. A CDS is quoted as a percentage premium paid by an investor to protect a notional dollar value of credit exposure. For example if an investor wanted to protect $1 million of exposure to Company "XYZ" and the prevailing CDS rate on "XYZ" was 100 basis points, it would mean the investor would pay $10,000 per year for protection on their $1 million exposure. 5-Year Credit Default Swaps For Nine Largest Countries in the World by Nominal GDP [GRAPHIC OMITTED] 5-Year Credit Default Swaps For All ETN Issuers [GRAPHIC OMITTED] Most recent issuer credit ratings. Credit ratings are assigned by Nationally Recognized Statistical Rating Organizations based on assessment of the credit worthiness of the underlying bond issuers. The ratings range from AAA (highest) to D (lowest) and are subject to change. Not rated indicates the debtor was not rated, and should not be interpreted as indicating low quality. For more information on rating methodologies, please visit the following NRSRO websites: standardandpoors.com and select "Understanding Ratings" under Rating Resources; moodys.com and select "Rating Methodologies" under Research and Ratings. Credit Rating by Issuer(1) -------------------------- ------------------ ---------------------- ------------------- Issuer SandP Credit Rating Moody's Credit Rating Fitch Credit Rating -------------------------- ------------------ ---------------------- ------------------- Barclays A A3 A -------------------------- ------------------ ---------------------- ------------------- UBS A A2 A -------------------------- ------------------ ---------------------- ------------------- DB A+ A2 A+ -------------------------- ------------------ ---------------------- ------------------- Credit Suisse A n/a A -------------------------- ------------------ ---------------------- ------------------- Svenska Handelsbanken AB AA- Aa3 AA- -------------------------- ------------------ ---------------------- ------------------- Morgan Stanley A- Baa1 A -------------------------- ------------------ ---------------------- ------------------- RBS A- n/a A -------------------------- ------------------ ---------------------- ------------------- JPMorgan A A2 A+ -------------------------- ------------------ ---------------------- ------------------- Goldman Sachs A- A3 A -------------------------- ------------------ ---------------------- ------------------- Citigroup A- n/a A -------------------------- ------------------ ---------------------- ------------------- Source: Bloomberg, L.P., as of Oct. 31, 2012 1 The ETNs are not rated by an independent rating agency. An issuer credit rating is not a recommendation to purchase, sell, or hold a []nancial obligation issued by an obligor, as it does not comment on market price or suitability for a particular investor. Data from Bloomberg L.P., as of Oct. 31, 2012 unless otherwise noted |
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Author of ETN Notebook
PowerShares Product Strategy and Research Team How to Contact: Graham Day, Alternative Asset Product Strategist
John Feyerer, CFA, VP, Product Strategy and Research PowerShares Product Strategy and Research Team
Jason Stoneberg, CFA, Vice President of Research email research@invescopowershares.com
Graham Day, Alternative Asset Product Strategist Invesco PowerShares
Joe Becker, Sr. Fixed and Equity Income Product Strategist email info@invescopowershares.com call 800 983 0903
Taylor Ames, Sr. Equity Product Strategist web invescopowershares.com twitter @PowerShares
Brad Smith, Research Analyst
Deutsche Bank AG, London Branch has flled a registration statement (including a
prospectus) with the SEC for the offerings to which this communication relates.
Before you invest, you should read the prospectus and other documents flled by
Deutsche Bank AG, London Branch for more complete information about the issuer
and these offerings. You may get these documents for free by visiting
powersharesetns.com | dbfunds.db.com/notes or EDGAR on the SEC website at
www.sec.gov. Alternatively, you may request a prospectus by calling 800 983 0903
| 877 369 4617, or you may request a copy from any dealer participating in the
applicable offering.
Important Risk Considerations
Each ETN offers investors exposure to the month-over-month performance of its
respective index measured from the flrst calendar day to the last calendar day
of each month and the amount you receive at maturity (or upon an earlier
repurchase) will be contingent upon each monthly performance of the respective
index during the term of the ETNs. The inverse or leveraged ETNs may not be
suitable for investors seeking an investment with a term greater than the time
remaining to the next monthly reset date and should be used only by
knowledgeable investors who understand the potential adverse consequences of
seeking longer-term inverse or leveraged investment results by means of
securities that reset their exposure monthly, resulting in the compounding of
monthly returns. Investing in the ETNs is not equivalent to a direct investment
in the applicable index or index components. The principal amount is also
subject to the monthly application of the investor fee, which can adversely
affect returns. There is no guarantee that you will receive at maturity, or upon
an earlier repurchase, your initial investment back or any return on that
investment. Signiflcant adverse monthly performances of your ETNs may not be
offset by any beneflcial monthly performances.
The ETNs are senior unsecured obligations of Deutsche Bank AG, London Branch,
and the amount due on the ETNs is dependent on Deutsche Bank AG, London Branch's
ability to pay. The ETNs are riskier than ordinary unsecured debt securities and
have no principal protection. Risks of investing in the ETNs include limited
portfolio diversiflcation, full principal at risk, uncertain tax treatment,
trade price fluctuations, illiquidity and leveraged losses. The investor fee
will reduce the amount of your return at maturity or upon redemption of your
ETNs even if the value of the relevant index has increased. If at any time the
repurchase value of the ETNs is zero, the relevant ETNs will be accelerated and
you will lose your entire investment in such ETNs. As described in the pricing
supplement, Deutsche Bank may redeem the ETNs for an amount in cash equal to the
repurchase value.
The ETNs may be sold throughout the day on NYSE Arca through any brokerage
account. There are restrictions on the minimum number of ETNs that you may
redeem directly with Deutsche Bank AG, London Branch, as specifled in the
applicable pricing supplement. Ordinary brokerage commissions apply. Sales in
the secondary market may result in losses.
DTO, SZO and OLO are concentrated in crude oil. The market value of the ETNs may
be influenced by many unpredictable factors, including, among other things,
volatility of commodities prices, changes in supply and demand relationships,
changes in interest rates, and monetary and other governmental actions. DTO, SZO
and OLO are concentrated in a single commodity sector, are speculative and
generally will exhibit higher volatility than commodity products linked to more
than one commodity sector.
DTO is a leveraged investment. As such, it is likely to be more volatile than an
unleveraged investment. There is also a greater risk of loss of principal
associated with a leveraged investment than with an unleveraged investment.
PowerShares([R]) is a registered trademark of Invesco PowerShares Capital
Management LLC. Invesco PowerShares Capital Management LLC is an indirect,
wholly owned subsidiary of Invesco Ltd.
Certain marketing services may be provided for these products by Invesco
Distributors, Inc. or its afflliate, Invesco PowerShares Capital Management LLC.
Invesco Distributors, Inc. will be compensated by Deutsche Bank or its
afflliates for providing these marketing services. Neither Invesco Distributors,
Inc. nor Invesco PowerShares Capital Management LLC is afflliated with Deutsche
Bank.
An investor should consider the ETNs' investment objectives, risks, charges and
expenses carefully before investing.
An investment in the ETNs involves risks, including the loss of some or all of
the principal amount. For a description of the main risks, see "Risk Factors" in
the applicable pricing supplement and the accompanying prospectus supplement and
prospectus.
This material must be accompanied or preceded by a prospectus. Before investing,
please read the prospectus carefully. Not FDIC Insured -- No Bank Guarantee --
May Lose Value
P-ETN-MR-7-E 11/12 X 11/12 PowerSharesETNs.com
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