db X-trackers MSCI World Health Care offers diversity

Nearly two thirds of the exchange traded fund (ETF) is invested in pharmaceutical companies, with top holdings including well known multi-nationals such as GlaxoSmithKline and Novartis. These are typically slow growth, but cash generative and defensive, hence their appeal in current market conditions. However, it's not just about heavyweights - the index comprises 114 companies in total, including some in faster-growing segments such as biotechnology.

More than 60 per cent of its assets are allocated to the US, the main area for healthcare investment, and the fund's base currency is the dollar. Switzerland (10.6 per cent) and the UK (7.92 per cent) are also prominent areas of exposure.

The ETF was launched less than two years ago but since launch has tracked the MSCI World Health Care TRN Index closely, with a tracking error of less than 1 per cent.

Like most db X-trackers ETFs, this one uses synthetic replication. It does not buy the shares in the index, but uses swap agreements to capture its returns. The swap counterparty is Deutsche Bank, which has an investment grade rating (A2/A+) from Moody's and Standard & Poor's. Investment grade rated companies are considered to be the least likely to default.

In exchange, Deutsche Bank gets the return from a basket of collateral held by the ETF - typically government bonds and blue-chip shares - which is worth more than 114 per cent of the assets of the fund, and would be used to pay back investors if Deutsche Bank defaulted.

Source: db X-trackers.

Performance data as at 20 July 2012.

Top 10 index holdings as at 29 June 2012 (%)

Sector weightings (%)