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21 October 2018

Investor Positioning and Flows

Strategy Update

North America Asset Allocation & Delta-1 Strategy

Investor Positioningand Flows

Date21 October 2018

Deutsche BankResearch

After The Pullback

In early September we pointed to several reasons for near term cautionThe S&P 500 was then at the top of its trend channel in place since early 2016;the window was open for a typical pullback of 3-5% that has historically occurredevery 2-3 months; the buyback blackout period was beginning; and potential fornoise from US mid-term elections was rising (Cautious Near Term, ConstructiveTo Year End, Sep 4 2018). In the event, the pullback occurred a little later andhas been a bit larger than we anticipated. But it does not change our read on thedrivers or that it’s just a pullback.

Pullback not about rising yields but rather a continuation of the defensiverotation on growth and end-cycle fearsBond yields rose over 40bps starting late August while the S&P 500 continuedto move up in its trend channel until the recent pullback. During the pullbackthe defensive bond-like sectors outperformed, while the cyclical sectors andbeneficiaries of higher bond yields sold off sharply. The coincidence of thepullback with some corporate profit warnings, points to growth and end-cycleconcerns being the primary driver and has been a continuation of the defensiverotation in place since late May when trade war concerns rose. At current levels,US and global equities have already priced in a significant growth slowdown.

The equity pullback mostly reflected a significant positioning unwind …The initial pullback on growth concerns was somewhat amplified by selling fromsystematic strategies which we estimate sold -$50bn on October 11th-12th. Ourmodels suggest that vol control funds were responsible for most of this selling,as these strategies were fully allocated to equities when volatility spiked abovetriggers for most strategies. We attribute some marginal selling of US equitiesto CTA strategies, although these funds came into the October sell-off withfar lighter allocations to S&P 500 than at the end of January. Additionally, wesaw drawdowns in long-short factors - Momentum, Excess Volatility, Growth -suggesting Hedge Funds and other active managers de-risked. From a thematicstandpoint, rates-sensitivity and inflation pairs were significant underperformersconsistent with concerns about a growth slowdown.

… not end investor outflows which looked to have followed the pullbackFlows out of US equity mutual funds and ETFs were muted during the initial steepdecline last Wednesday, but picked up later and continued through the marketbounce on Tuesday (-$23bn). The last 2 days have seen inflows return (+$8bn)despite the renewed market pullback. The largest outflows across regions lastweek were from the US (-$15bn) and Europe (-$5bn), while Japan (+$6bn) and

Parag Thatte

Strategist

+1-212-250-6605

Srineel Jalagani, CFA

Strategist

+1-212-250-4509

Hallie Martin

Strategist

+1-212-250-7994

Binky Chadha

Chief Strategist

+1-212-250-4776

Deutsche Bank Securities Inc.

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should considerthis report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONSARE LOCATED IN APPENDIX 1. MCI (P) 091/04/2018.

Distributed on: 21/10/2018 20:15:10 GMT

7T2se3r0Ot6kwoPa

mailto:[email protected]




21 October 2018


EM (+$2.3bn) saw inflows, surprisingly their largest since April. Across sectors,defensive bond-like funds in Utilities, Telecom and Healthcare saw modest inflowswhile most cyclicals saw outflows with the Financials (-$2bn) seeing by far thelargest.

Looking forward, we see■ The buyback blackout period starting to ease next week. With next

week seeing a peak number of companies reporting, and half way throughthe earnings season, blackout periods which have been the subject ofintense focus should start easing and we estimate buybacks will slowlyrevert to the normal pace of $15bn a week on net ($19bn gross).

■ If volatility normalizes, we expect vol control funds to gradually buyequities over 2-3 weeks. Volatility metrics - eg. VIX, realized vol, putimplied volatility - are still above 10%, 12%, 15% vol targets. Thesemetrics will need to normalize below vol targets for equity buying to start.

■ Pattern in previous pullbacks points to pace of equity outflowsmoderating from here. The large outflows in this episode have beensimilar in magnitude to those seen in previous 5%+ pullbacks.Importantly, the historical pattern points to the pace of outflowsmoderating from next week. Further, modestly positive data surprises, thespike in rates and seasonality are all supportive of equity inflows. Risingrates have led to flows out of bond funds, which with a lag should rotateinto equities, as has historically been the case. Flows have also historicallyexhibited seasonality with the last 2 months of the year seeing a pickupafter a slowing from June to October.

■ Positioning across most risk asset classes relatively muted, unlikebefore the February selloff. The selloff in February was characterizedby several asset classes seeing strongly correlated momentum andstretched consensus positioning, 1.5 to 3sd away from historical averages(Stretched Consensus Positioning, Jan 2018). By contrast, positioningacross most risk asset classes was much more muted (<1sd) this time.

Largest bond fund outflows since the 2016 US election join extreme bondfutures shortsNet shorts in bond futures have been climbing steadily to new all-time extremesover the last year. Bond funds had however continued to largely enjoy inflows untillate September (+$275bn last 12 months). That changed over the last 4 weeks asrates rose sharply, with outflows (-$27bn) at the fastest pace since the 2016 USPresidential election. Bond outflows notably continued over the last week throughthe equity pullback.

Oil futures positioning still long in contrast to shorts in goldCommodity futures positions (and prices) have inversely tracked dollar positioninghistorically. Over the last 2 months however even as dollar longs rose to near 2year highs, oil longs continued to remain range bound at elevated levels. Oil longsare now being cut back. Positions in gold on the other hand were extremely shortand are now being pared back; copper positions are near neutral.


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In early September we pointed to several reasons for near term caution

Figure 1:S&P 500 fell below its 2.5 year channel Figure 2:Adjusted for trend the pullback is worse than in February

18001800

Dec-1

5

Mar-

16

Jun-1

6

Sep

-16

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

LogLog S&P 500

Since Mar 2016

Trend growth rate = 15.0% (annualized)

Range = +/- 1.65%

Jun 2016:

Brexit vote

Sep/Oct 2016:

Pre US-

election

selloff

Feb selloff

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Mar-

16

Jun-1

6

Sep

-16

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Dec-1

8

S&P 500 deviation from channel since 2016

Jun 2016:

Brexit vote

Sep/Oct 2016:

Pre US-

election

selloff

Feb selloff

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver Analytics, Data as of 18-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver Analytics, Data as of 18-Oct-18

Pullback not about rising yields but rather a continuation of the defensive rotation on growth and end-cycle fears

Figure 3:Defensive bond-like sectors outperformed through the pullback Figure 4:S&P 500 already pricing in a sharp slowdown in growth

-3.5%

-1.9%-1.5%

-0.5% -0.3% -0.1%

1.6% 1.7%

2.8% 2.8%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Energ

y

Ind

ustr

ials

Fin

ancia

ls

Co

ns D

isc IT

Mate

rials

Co

m S

erv

ices

Health C

are

Co

ns S

tap

les

Utilit

ies

Sector returns relative (Oct 9, 2018 to Oct 18, 2018)

556065707580859095100105110115120125

30

35

40

45

50

55

60

65

Jan-9

7

Jan-9

9

Jan-0

1

Jan-0

3

Jan-0

5

Jan-0

7

Jan-0

9

Jan-1

1

Jan-1

3

Jan-1

5

Jan-1

7

Jan-1

9

10/18/2018 = 100

US ISM Mfg (lhs) S&P 500 / 200d moving average (rhs)

Correlation: 65%

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver Analytics, Data as of 18-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, ISM, Haver Analytics, Data as of 18-Oct-18

21

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Pullback does not reflect equity outflows which followed later

Figure 5:Outflows started after the bulk of the pullback was done Figure 6:Equity outflows similar to prior pullback episodes

-10

-6

-2

2

6

10

14

18

2720

2770

2820

2870

2920

1-A

ug

8-A

ug

15

-Aug

22

-Aug

29

-Aug

5-S

ep

12

-Sep

19

-Sep

26

-Sep

3-O

ct

10

-Oct

17

-Oct

US daily equity flows and S&P 500

Fund Flows (rhs, $bn)

S&P 500 (lhs)

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

-10

-8

-6

-4

-2

0

2

4

6

8

10

Jan-1

2

Jun-1

2

No

v-1

2

Ap

r-1

3

Sep

-13

Feb

-14

Jul-14

Dec-1

4

May-1

5

Oct-

15

Mar-

16

Aug

-16

Jan-1

7

Jun-1

7

No

v-1

7

Ap

r-1

8

Sep

-18

Feb

-19

US Equity Flows 4w ma ($ bn, lhs) S&P 500 (4w chg, rhs)

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, EPFR, Haver Analytics, Data as of 18-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, EPFR, Haver Analytics, Data as of 17-Oct-18

The buyback blackout period starting to ease next week

Figure 7:Blackout period starts to ease next week Figure 8:The S&P 500 and earnings seasons

0%

20%

40%

60%

80%

100%

0%

20%

40%

60%

80%

100%

Aug

-17

Aug

-24

Aug

-31

Sep

-07

Sep

-14

Sep

-21

Sep

-28

Oct-

05

Oct-

12

Oct-

19

Oct-

26

No

v-0

2

No

v-0

9

No

v-1

6

No

v-2

3

No

v-3

0

S&P 500 companies in blackout period

% of companies in

blackout period

Blackout period

eases starting

next week

2230

2330

2430

2530

2630

2730

2830

2930

2230

2330

2430

2530

2630

2730

2830

2930

Dec-1

6

Feb

-17

Ap

r-17

Jun-1

7

Aug

-17

Oct-

17

Dec-1

7

Feb

-18

Ap

r-18

Jun-1

8

Aug

-18

Oct-

18

Earnings Season S&P 500

4.9%

return

3.6%

return1.2%

return

North Korea

Tensions -

Charlottesville

3.6%

return

Tax reforms begins to

get priced in (late Nov)

0.6%

return

4.5%

return

4.0%

return

-1.6%

return

-1.9%

return

-1.8%

return

2.3%

return

3.4%

return

3.7%

return

-6.0%

return

Trade war

tensions+3.8%

return to

peak

1.5%

return

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Data as of 18-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Haver Analytics, Data as of 18-Oct-18

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Pattern in previous pullbacks points to pace of equity outflows moderating from here

Figure 9: Pattern in prior pullbacks points to outflows easing from here Figure 10:Positive seasonality for equity inflows in the last 2 months

-25

-20

-15

-10

-5

0

5

10

-25

-20

-15

-10

-5

0

5

10W

eek 0

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Week 8

Week 9

Week 1

0

Week 1

1

Week 1

2

Week 1

3

Current

Median

Average

US equity flows around pullbacksCumulative flows since start of 5%+ pullbacks, since 2014 ($bn)

-0.1%

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

-0.1%

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Aug

Sep

Oct

No

v

Dec

US equity flows (MFs + ETFs, % of assets)

Median since 1993 Average

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, EPFR, Haver Analytics, Data as of 17-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, ICI, Haver Analytics, Data as of 17-Oct-18

Positioning across most risk asset classes relatively muted, unlike before the February selloff

Figure 11:Positioning across most risk asset classes muted compared to the February selloff

-2.0

-1.0

0.0

1.0

2.0

3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Russell

200

0

US

D

Oil

VIX

MX

N

DJIA

BR

L

Euro

S&

P 4

00

EM

eq

uitie

s

S&

P 5

00

RU

B

CA

D

Co

pp

er

Nasd

aq

100

AU

D

Net long futures positions* (as % of open interest)

(z score, since 2010)

Latest Jan 30 2018

*Non commercial positions in FX and bonds; (Asset managers + Lev funds) in equities; Managed Money in commodities

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Haver Analytics, Data as of 16-Oct-18

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Largest bond fund outflows since the 2016 US election join extreme bond futures shorts

Figure 12:Bond futures near extremes Figure 13:Largest outflows from bond funds since Nov 2016 elections

-2200

-1700

-1200

-700

-200

300

-2200

-1700

-1200

-700

-200

300

Jan-1

0

Jul-10

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

Jan-1

5

Jul-15

Jan-1

6

Jul-16

Jan-1

7

Jul-17

Jan-1

8

Jul-18

Bonds net longs in 10y equivalents (thous)

Aggregated Non commercial net long contracts

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

Jan-1

5

Jul-15

Jan-1

6

Jul-16

Jan-1

7

Jul-17

Jan-1

8

Jul-18

Duration sensitive bond fund flows 4w ma ($ bn, rhs)

US 10y yield (4w chg, lhs)

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Haver Analytics, Data as of 16-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, EPFR, FRB, Haver Analytics, Data as of 17-Oct-18

Oil futures positioning still long in contrast to large shorts in gold

Figure 14: Oil and USD positioning have diverged over last 2 months Figure 15: Shorts in gold pared back from extremes

100

200

300

400

500

600

700

800

900

1000

1100

1200-60

-40

-20

0

20

40

60

80

100

Jun-1

3

Oct-

13

Feb

-14

Jun-1

4

Oct-

14

Feb

-15

Jun-1

5

Oct-

15

Feb

-16

Jun-1

6

Oct-

16

Feb

-17

Jun-1

7

Oct-

17

Feb

-18

Jun-1

8

Oct-

18

Oil and Trade wtd dollar futures net positions

USTW$ (thous contracts, inverted, lhs)

Oil futures position (mn barrels, rhs)

600

800

1000

1200

1400

1600

1800

-150

-100

-50

0

50

100

150

200

250

300

Jun-0

6

Jun-0

7

Jun-0

8

Jun-0

9

Jun-1

0

Jun-1

1

Jun-1

2

Jun-1

3

Jun-1

4

Jun-1

5

Jun-1

6

Jun-1

7

Jun-1

8

Managed Money Gold Futures positions Net long contracts (thous, lhs)

Gold ($/troy oz, rhs)

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Haver Analytics, Data as of 16-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Haver Analytics, Data as of 16-Oct-18

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Systematic strategies - mostly vol control - likely sold $50bn in equity beta, and long-short strategies also de-risked

Figure 16: Vol control funds sold ~$40bn on recent sell-off and wouldre-allocate over 2-3 weeks if volatility is low

Figure 17:CTAs had much lower S&P 500 exposure at the end ofSeptember versus end of January

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 10-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 10-Oct-18

Figure 18: Banks, Infrastructure, Inflation, Rates Sensitivityunderperformed over past 1W

Figure 19:Excess Volatility and Momentum drew down in the Octobersell-off

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

US

Leve

rag

e

DB

US

FLE

V

Insu

ran

ce

DB

US

INP

C/D

BU

SS

XLF

He

alt

hca

re

DB

US

SXLV

/DB

USS

SPY

Air

lin

es

DB

US

AIR

L/D

BU

SSX

LI

Ra

tes

Sen

siti

vity

DB

US

RT

UP

/DB

US

RT

DN

Infl

ati

on

(Q

ua

nt)

DB

US

INFP

/DB

US

INFN

Infl

ati

on

(A

na

lyst

s)

DB

US

INFW

/DB

US

INFL

Ch

ea

p Q

ua

lity

DB

US

QLT

E/D

BU

SS

SPY

He

dg

e F

un

d F

ina

nci

als

DB

HFA

FN

L/D

BU

SSX

LF

Ma

chin

ery

S5

MA

CH

/DB

US

SX

LI

Infr

ast

ruct

ure

DB

US

INFR

/SP

YSS

PY

Re

gio

na

l B

an

ks

KR

E/D

BU

SSX

LF

Sm

all

Ba

nks

KB

E/D

BU

SSX

LF

Wed-Wed Return (Stdev vs 1Y)

0.90

0.95

1.00

1.05

1.10

Jan-18

Feb-18

Mar-18

Apr-18

May-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

DBUSFMOM DBUSFGRW DBUSFVLU

DBUSFVOL DBUSFLEV

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 18-Oct-18 Source:Deutsche Bank Quantitative & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 17-Oct-18

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Cross-Asset Futures Positioning and Flows

Figure 20: Cross asset futures positioning

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Russell

200

0

US

D

Oil

VIX

MX

N

DJIA

BR

L

Euro

S&

P 4

00

EM

eq

uitie

s

S&

P 5

00

RU

B

CA

D

Co

pp

er

GB

P

CH

F

JP

Y

ED

3m

Nasd

aq

100

2y

15-2

5y

5y

AU

D

10y

25y+

NZD

Silv

er

Go

ld

Net long positions* (as % of Open interest)

(z score, since 2010)Latest

Week ago


Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18

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Figure 21: Investors cut equity risk and added FX positions WoW

-15%

-10%

-5%

0%

5%

10%

15%

-15%

-10%

-5%

0%

5%

10%

15%

Go

ld

VIX

GB

P

Silv

er

15-2

5y

Co

pp

er

5y

US

D

BR

L

CA

D

RU

B

10y

2y

Nasd

aq

100

ED

3m

25y+

Oil

JP

Y

AU

D

Euro

S&

P 5

00

EM

eq

uitie

s

MX

N

NZD

Russell

2000

CH

F

S&

P 4

00

DJIA

Weekly change in net positions* (as % of Open interest)


Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18

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vFLARE: Volatility-Sensitive Systematic Strategies

Figure 22: Vol control funds sold ~$40bn on recent sell-off and wouldre-allocate over 2-3 weeks if volatility is low

Figure 23:Risk-parity funds most likely have not cut equity exposure

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 10-Oct-18 Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 10-Oct-18

Figure 24:CTAs cut some S&P 500 beta and still are long oil and shortEM beta

Figure 25:CTA exposure to S&P 500 is much lower than in January 2018

Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 10-Oct-18 Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 10-Oct-18

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Futures Positioning: US Equities, USD, WTI Oil, & 10Y Treasuries

Figure 26:Investor positioning in US equity futures is -55% lower versusend of January

Figure 27: Dollar futures positioning

2000

2100

2200

2300

2400

2500

2600

2700

2800

2900

3000

-$50

-$30

-$10

$10

$30

$50

$70

$90

$110

$130

$150

Jun-16 Nov-16 Apr-17 Sep-17 Feb-18 Jul-18

No

tion

al (B

illio

ns)

Net Non-Dealer US Equities Futures Positioning ES1 Index (rhs)

84

86

88

90

92

94

96

-50

-30

-10

10

30

50

70

Jan-1

6

Mar-

16

May-1

6

Jul-1

6

Sep

-16

No

v-1

6

Jan-1

7

Mar-

17

May-1

7

Jul-1

7

Sep

-17

No

v-1

7

Jan-1

8

Mar-

18

May-1

8

Jul-1

8

Sep

-18

No

v-1

8

Trade wtd dollar futures positions vs USTWINon commercial net long contracts (thous, lhs) USTWI (rhs)

Trade weighted positions in JPY, EUR, GBP, AUD, CHF and CAD are used for calculating

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18

Figure 28: Oil futures positions Figure 29:Investors are heavily short Treasuries on rising 10Y yields

40

45

50

55

60

65

70

75

300

500

700

900

1100

1300

Jun-1

6

Sep

-16

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Oil futures position vs WTI price Oil futures position (net longs, million barrels, lhs)

WTI ($/barrel, rhs)

Note: Net positions of combined WTI and Brent crude oil positions

-250

-200

-150

-100

-50

01.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Ja

n-1

6

Ma

r-1

6

Ma

y-1

6

Ju

l-1

6

Se

p-1

6

No

v-1

6

Ja

n-1

7

Ma

r-1

7

Ma

y-1

7

Ju

l-1

7

Se

p-1

7

No

v-1

7

Ja

n-1

8

Ma

r-1

8

Ma

y-1

8

Ju

l-1

8

Se

p-1

8

Spec TY contract equivalents (ex. ED, '000s) US 10Y Yield(%) (lhs)

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18 Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18.

21

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r Po

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ing

and

Flows

Pag

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Deu

tsche B

ank S

ecurities In

c.

Futures Positioning: US Equities

Figure 30: Leveraged Funds have been cutting S&P 500 futuresexposure, while Asset Managers added

Figure 31:Aggregate futures positions and shorts in single stocks andETFs

-$100

-$50

$

$50

$100

$150

$200

Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13 Jun-15 Dec-16 Jun-18

No

tio

nal (B

illio

ns)

S&P 500 Futures - Net Positioning

Asset Manager Leveraged-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

Jan-1

4

Jan-1

5

Jan-1

6

Jan-1

7

Jan-1

8

Aggregate longs in cash equities, ETFs and futures (% of SPX mkt cap)

Note: Futures net longs minus single stock and ETF shorts. Shorts data as of Sep 28, S&P futures Oct 09

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 09-Oct-18.

Figure 32:Leveraged Funds have lighter US equity exposure than AMs-1YPercentile Ranks

Figure 33:Asset Managers cut long equity exposures - 1Y Z-score ofWoW Change

SPX RTY NDX DJIA MSCI EM MSCI EAFE

ND - Long 6% 2% 35% 42% 19% 10%

ND - Short 79% 46% 40% 83% 0% 44%

ND - Net 42% 0% 37% 50% 4% 8%

AM - Long 23% 40% 60% 73% 62% 54%

AM - Short 29% 77% 10% 81% 0% 31%

AM - Net 17% 56% 35% 92% 0% 46%

LM - Long 10% 0% 29% 25% 10% 2%

LM - Short 100% 35% 94% 54% 100% 88%

LM - Net 87% 8% 63% 23% 27% 12%

Other - Long 100% 46% 65% 79% 2% 69%

Other - Short 58% 10% 23% 62% 100% 13%

Other - Net 87% 10% 27% 87% 27% 10%

SPX RTY NDX DJIA MSCI EM MSCI EAFE

ND - Long -0.47 -1.55 -0.42 -2.68 0.13 1.59

ND - Short -0.13 0.46 0.00 -0.15 -1.89 -1.62

ND - Net -1.30 -1.64 -0.33 -2.69 -0.80 0.62

AM - Long -1.94 -1.28 -1.88 -1.30 -0.20 1.19

AM - Short -1.13 -0.48 -0.20 0.30 -2.74 -3.22

AM - Net -3.27 -1.51 -1.52 -1.04 -1.35 0.25

LM - Long 1.26 -0.92 1.68 -3.05 0.97 0.18

LM - Short 0.67 1.22 0.64 -0.51 0.39 0.25

LM - Net 3.09 0.04 1.72 -3.05 1.11 0.28

Other - Long 0.78 0.13 -0.80 -0.07 -0.08 -0.09

Other - Short -0.01 0.38 -0.93 0.17 0.41 0.09

Other - Net 0.41 0.34 -1.34 0.13 0.27 -0.07

Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18. Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 16-Oct-18.

21

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ETFs: Volumes and Flows

Figure 34: Despite realized vol moving higher, volumes normalized thisweek

Figure 35: ETF volumes are still somewhat elevated averaging 32% oftotal cash volujmes this week

$100

$150

$200

$250

$300

$350

$400

$-

$50

$100

$150

$200

$250

$3002

8-S

ep

-18

01

-Oct

-18

02

-Oct

-18

03

-Oct

-18

04

-Oct

-18

05

-Oct

-18

08

-Oct

-18

09

-Oct

-18

10

-Oct

-18

11

-Oct

-18

12

-Oct

-18

15

-Oct

-18

16

-Oct

-18

17

-Oct

-18

18

-Oct

-18

Bil

lio

ns

Bil

lio

ns

ETF vs Cash VolumesAsset AllocationPseudo FuturesSectorLeveragedCash Stock Volumes (rhs))

10%

15%

20%

25%

30%

35%

40%

45%

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

Ap

r-1

8

Jul-

18

Oct

-18

ETPs as % of Total Cash Volumes

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 18-Oct-18. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 18-Oct-18.

Figure 36: After 4 consecutive days of outflows totaling -$17bn, equityETFs saw +$10bn inflows on Wednesday and Thursday

Figure 37: Inflows to equity ETFs on Wednesday and Thursday were totrading liquidity and asset allocation products

$(8,000)

$(6,000)

$(4,000)

$(2,000)

$-

$2,000

$4,000

$6,000

$8,000

$10,000

28-S

ep

-18

01-O

ct-

18

02-O

ct-

18

03-O

ct-

18

04-O

ct-

18

05-O

ct-

18

09-O

ct-

18

10-O

ct-

18

11-O

ct-

18

12-O

ct-

18

15-O

ct-

18

16-O

ct-

18

17-O

ct-

18

18-O

ct-

18

$m

n

Daily ETF Flows - Equity vs Fixed Income

Equity ETFs Fixed Income ETFs

$(8,000)

$(6,000)

$(4,000)

$(2,000)

$-

$2,000

$4,000

$6,000

$8,000

$10,000

28-S

ep

-18

01-O

ct-

18

02-O

ct-

18

03-O

ct-

18

04-O

ct-

18

05-O

ct-

18

09-O

ct-

18

10-O

ct-

18

11-O

ct-

18

12-O

ct-

18

15-O

ct-

18

16-O

ct-

18

17-O

ct-

18

18-O

ct-

18

$m

n

Daily Equity ETF Flows

Pseudo-Futures Asset Allocation + Mixed Use Sector

Billions

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 18-Oct-18. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 18-Oct-18

21

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ecurities In

c.

Equity Premia: Fast Factors, Hedge Funds, Themes

Figure 38:US Fast Factors: Leverage & Growth rallied this week despitethe prospect of rising rates

Figure 39:Europe Fast Factors: Residual Volatility continues to slidesuggesting risk aversion

0.90

0.95

1.00

1.05

1.10

Jan-18

Feb-18

Mar-18

Apr-18

May-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

DBUSFMOM DBUSFGRW DBUSFVLU DBUSFVOL DBUSFLEV

0.90

0.95

1.00

1.05

1.10

Jan-18

Feb-18

Mar-18

Apr-18

May-

18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

DBCGFMOM DBCGFGRW DBCGFVLU

DBCGFVOL DBCGFLEV

Source:Deutsche Bank Quantitative & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 17-Oct-18 Source:Deutsche Bank Quantitative & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 17-Oct-18

Figure 40: Hedge Funds: Favorite longs bounced early in the week thenslid with the market

Figure 41: Thematic Baskets: Banks, Infrastructure, Inflation, RatesSensitivity underperformed over past 1W while Leverage andHealthcare outperformed

0.95

1.00

1.05

1.10

1.15

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-

18

Au

g-1

8

Se

p-1

8

Oct

-18

DBUSXHFA: Top 50 $ Allocations

DBUSXHFN: Sector-Neutral Top $ Allocations

DBUSXHFO: Sector-Neutral High Ownership

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

US

Leve

rag

e

DB

US

FLE

V

Insu

ran

ce

DB

US

INP

C/D

BU

SS

XLF

He

alt

hca

re

DB

US

SXLV

/DB

USS

SPY

Air

lin

es

DB

US

AIR

L/D

BU

SSX

LI

Ra

tes

Sen

siti

vity

DB

US

RT

UP

/DB

US

RT

DN

Infl

ati

on

(Q

ua

nt)

DB

US

INFP

/DB

US

INFN

Infl

ati

on

(A

na

lyst

s)

DB

US

INFW

/DB

US

INFL

Ch

ea

p Q

ua

lity

DB

US

QLT

E/D

BU

SS

SPY

He

dg

e F

un

d F

ina

nci

als

DB

HFA

FN

L/D

BU

SSX

LF

Ma

chin

ery

S5

MA

CH

/DB

US

SX

LI

Infr

ast

ruct

ure

DB

US

INFR

/SP

YSS

PY

Re

gio

na

l B

an

ks

KR

E/D

BU

SSX

LF

Sm

all

Ba

nks

KB

E/D

BU

SSX

LF

Wed-Wed Return (Stdev vs 1Y)

Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 18-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 18-Oct-18

21

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S&P 500 Options: Open Interest, Vol, Skew, Correlation

Figure 42: SPY open interest is concentrated at 90-110% spot withsome in-the-money puts having been monetized since last week

Figure 43: Put-call ratio is relatively low versus 2017 and early 2018

Source: Deutsche Bank Quant & Delta-1 Strategy, OptionMetrics, Bloomberg Finance LP. Data as of 17-Oct-18. Source: Deutsche Bank Quant & Delta-1 Strategy, OptionMetrics, Bloomberg Finance LP. Data as of 17-Oct-18.

Figure 44: Realized volatility spiked but not to February extremes Figure 45:Implied volatility and skew rose to levels last seen in April

0

3

6

9

12

15

18

21

24

0

10

20

30

40

50

60

70

80

Oct-

15

Dec-1

5

Feb-1

6

Ap

r-16

Jun

-16

Au

g-1

6

Oct-

16

Dec-1

6

Feb-1

7

Ap

r-17

Jun

-17

Au

g-1

7

Oct-

17

Dec-1

7

Feb-1

8

Ap

r-18

Jun

-18

Au

g-1

8

Oct-

18

S&P 500 1M Realized Correlation (lhs)

S&P 500 1M Realized Volatility (rhs)

5

7

9

11

13

15

17

19

21

23

25

Oct-

15

Dec-1

5

Feb

-16

Ap

r-1

6

Ju

n-1

6

Au

g-1

6

Oct-

16

Dec-1

6

Feb

-17

Ap

r-17

Ju

n-1

7

Au

g-1

7

Oct-

17

Dec-1

7

Feb

-18

Ap

r-18

Ju

n-1

8

Au

g-1

8

Oct-

18

S&P 500 3M 90-110 Skew

S&P 500 3M Implied Volatility

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Bloomberg Finance LP, Reuters. Data as of 17-Oct-18. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Bloomberg Finance LP, Reuters. Data as of 17-Oct-18.

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Deu

tsche B

ank S

ecurities In

c.

Cross-asset flows

Figure 46: Flows across asset classes cumulative since 2017 Figure 47:Cross asset flows last 4 weeks

-100

0

100

200

300

400

500

600

700

-100

0

100

200

300

400

500

600

700

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Cumulative flows since Jan 2017 ($bn)

Equity

Bonds

MM funds

-1.3

-1.1

-0.9

-0.7

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

-1.3

-1.1

-0.9

-0.7

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

MM Govt

Bonds

Corp

HG

EM

Bonds

Corp

HY

Bal

Funds

Div

Funds

DM

Equity

EM

Equity

Cross asset flows as a % of assets

(last 4 weeks)

26-Sep 3-Oct

10-Oct 17-Oct

Safer Riskier


Figure 48:Equity flows across by region Figure 49:Bond flows by category

-100

-50

0

50

100

150

200

250

300

-100

-50

0

50

100

150

200

250

300

Dec-1

6

Mar-

17

Ju

n-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Cumulative equity flows since Jan 2017

(monthly, $bn)US

Europe

Japan

EM

International*

*Funds with a global mandate, overwhelmingly tend to be focused on DM ex-US

-110

-90

-70

-50

-30

-10

10

30

50

70

90

-110

-90

-70

-50

-30

-10

10

30

50

70

90

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Cumulative bond flows since 2017 ($bn)

Corp HY EM

Corp HG Govt Bonds

Munis MBS

TIPS Banks Loans


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Equity Flows

Figure 50: Regional equity fund flows last 4 weeks Figure 51: Sector fund flows

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3A

ll E

quity

US

Euro

pe

Jap

an

Lata

m

Asia

ex J

p

EM

EA

EM

Glo

bal

Regional equity flows (last 4 weeks,% of assets )

26-Sep 3-Oct

10-Oct 17-Oct

-35

-25

-15

-5

5

15

25

35

45

-35

-25

-15

-5

5

15

25

35

45

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Cumulative sector flows since 2017 (monthly, $bn)Technology

Financials

Materials

Industrials

Cons Goods

Telecom

Utilities

Health Care

Energy

Real Estate


Figure 52: Equity flows by fund style Figure 53: Equity fund flows by size

-150

-100

-50

0

50

100

150

-150

-100

-50

0

50

100

150

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Cumulative equity flows since Jan 2017 ($bn)Growth Value Blend

-50

-40

-30

-20

-10

0

10

20

-50

-40

-30

-20

-10

0

10

20

Dec-1

6

Mar-

17

Ju

n-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Cumulative equity flows since Jan 2017 ($bn)Large cap Mid cap Small cap


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ecurities In

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Bond fund flows

Figure 54: Bond fund flows by category last 4 weeks Figure 55: Bond fund flows by maturity

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

-1.3

-1.1

-0.9

-0.7

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7A

ll B

ond

s

Co

rp H

Y

Co

rp H

G

EM

Bo

nd

s

Go

vt

Bo

nd

s

Munis

MB

S

TIP

S

Ban

k L

oans

Bond flows (last 4 weeks, % of assets)

26-Sep 3-Oct 10-Oct 17-Oct

0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350

Dec-1

6

Mar-

17

Ju

n-1

7

Sep

-17

Dec-1

7

Mar-

18

Ju

n-1

8

Sep

-18

Cumulative bond flows since Jan 2017 ($bn)

Long Term

Intermediate Term

Short Term

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, EPFR, Haver Analytics, Data as of 17-Oct-18 Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, EPFR, Haver Analytics, Data as of 17-Oct-18

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Bond futures positioning

Figure 56: Aggregate bond futures positioning Figure 57: Bond futures positioning by maturity

-2200

-1700

-1200

-700

-200

300

-2200

-1700

-1200

-700

-200

300

Jan-1

0

Jul-10

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

Jan-1

5

Jul-15

Jan-1

6

Jul-16

Jan-1

7

Jul-17

Jan-1

8

Jul-18

Bonds net longs in 10y equivalents (thous)

Aggregated Non commercial net long contracts

-18.1%

-11.7%

-18.1%

-14.9%

-11.2%

-22.5%-25%

-20%

-15%

-10%

-5%

0%

5%

-25%

-20%

-15%

-10%

-5%

0%

5%

ED 2y

5y

10y

15-2

5y

25y+

Bond futures positions as % of open interest

Latest 1 week ago

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Haver Analytics, Data as of 9-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Haver Analytics, Data as of 9-Oct-18

Figure 58:Eurodollar futures positioning Figure 59:Bond futures positioning by maturity

1.0

1.5

2.0

2.5

3.0

3.5-4500

-3500

-2500

-1500

-500

Jan-1

6

Mar-

16

May-1

6

Jul-1

6

Sep

-16

No

v-1

6

Jan-1

7

Mar-

17

May-1

7

Jul-1

7

Sep

-17

No

v-1

7

Jan-1

8

Mar-

18

May-1

8

Jul-1

8

Sep

-18

No

v-1

83m Eurodollar futures positions vs 3m LIBOR

Non commercial net long contracts (thous, lhs) ED12 (rhs, inv)

-26%

-21%

-16%

-11%

-6%

-1%

4%

9%

14%

-26%

-21%

-16%

-11%

-6%

-1%

4%

9%

14%

Jan-1

6

Ap

r-1

6

Jul-1

6

Oct-

16

Jan-1

7

Ap

r-1

7

Jul-1

7

Oct-

17

Jan-1

8

Ap

r-18

Jul-1

8

Oct-

18

Net long contracts as % of open interest2y 5y 10y 15-25y 25y+ ED

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Haver Analytics, Data as of 9-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Haver Analytics, Data as of 9-Oct-18

21

Octo

ber 2

018

Investo

r Po

sition

ing

and

Flows

Pag

e 20

Deu

tsche B

ank S

ecurities In

c.

FX futures positioning

Figure 60:Trade weighted dollar positioning Figure 61:Euro futures positioning

84

86

88

90

92

94

96

-50

-30

-10

10

30

50

70

Jan-1

6

Mar-

16

May-1

6

Jul-1

6

Sep

-16

No

v-1

6

Jan-1

7

Mar-

17

May-1

7

Jul-1

7

Sep

-17

No

v-1

7

Jan-1

8

Mar-

18

May-1

8

Jul-1

8

Sep

-18

No

v-1

8

Trade wtd dollar futures positions vs USTWINon commercial net long contracts (thous, lhs) USTWI (rhs)

Trade weighted positions in JPY, EUR, GBP, AUD, CHF and CAD are used for calculating

1.04

1.08

1.12

1.16

1.20

1.24

-150

-100

-50

0

50

100

150

Jan-1

6

Ap

r-1

6

Jul-16

Oct-

16

Jan-1

7

Ap

r-1

7

Jul-17

Oct-

17

Jan-1

8

Ap

r-1

8

Jul-18

Oct-

18

Euro futures positions vs EURUSDNon commercial net long contracts (thous, lhs) EURUSD (rhs)

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, FRB, Haver Analytics, Data as of 9-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, FRB, Haver Analytics, Data as of 9-Oct-18

Figure 62:Yen futures positioning Figure 63: Futures positioning across currencies

100

102

104

106

108

110

112

114

116

118

120-150

-125

-100

-75

-50

-25

0

25

50

75

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

JPY futures positions vs USDJPYNon commercial net long contracts (thous, lhs)

USDJPY (rhs, inv)

-57%-48% -46%

-26% -24%

-10%-6%

0%

11%

20%

32%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

NZD

JP

Y

AU

D

CH

F

GB

P

CA

D

Euro

BR

L

RU

B

US

D

MX

N

Currency positioning as % of open interest

Latest

1 week ago

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, FRB, Haver Analytics, Data as of 9-Oct-18 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Haver Analytics, Data as of 9-Oct-18

21

Octo

ber 2

018

Investo

r Po

sition

ing

and

Flows

Deu

tsche B

ank S

ecurities In

c.Pag

e 21

Commodity futures positioning

Figure 64: Oil futures positioning Figure 65:Oil futures gross longs vs shorts

100

300

500

700

900

1100

100

300

500

700

900

1100Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Jan-1

4

Jul-14

Jan-1

5

Jul-15

Jan-1

6

Jul-16

Jan-1

7

Jul-17

Jan-1

8

Jul-18

Net long crude oil futures positions

(Managed Money, million barrels)

Note: Net positions of combined WTI and Brent crude oil positions

0

250

500

750

1000

1250

0

250

500

750

1000

1250

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Managed Money combined crude oil futures positions

(million barrels)Gross longs

Gross shorts


Figure 66:Copper futures positioning Figure 67:Gold futures positioning

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

-50

0

50

100

Jan-1

6

Mar-

16

May-1

6

Jul-16

Sep

-16

No

v-1

6

Jan-1

7

Mar-

17

May-1

7

Jul-17

Sep

-17

No

v-1

7

Jan-1

8

Mar-

18

May-1

8

Jul-18

Sep

-18

No

v-1

8Managed Money Copper futures positions

Net long contracts (thous, lhs)

Copper ($/lb, rhs)

1125

1175

1225

1275

1325

1375

-130

-80

-30

20

70

120

170

220

270

Jan-1

6

Mar-

16

May-1

6

Jul-16

Sep

-16

No

v-1

6

Jan-1

7

Mar-

17

May-1

7

Jul-17

Sep

-17

No

v-1

7

Jan-1

8

Mar-

18

May-1

8

Jul-18

Sep

-18

No

v-1

8

Managed Money Gold futures positions Net long contracts (thous, lhs)

Gold ($/troy oz, rhs)


21

Octo

ber 2

018

Investo

r Po

sition

ing

and

Flows

21 October 2018


Appendix 1

Important Disclosures

*Other information available upon request

*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced fromlocal exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subjectcompanies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other thanthe primary subject of this research, please see the most recently published company report or visit our global disclosurelook-up page on our website at https://research.db.com/Research/Disclosures/CompanySearch. Aside from within thisreport, important risk and conflict disclosures can also be found at https://research.db.com/Research/Topics/Equities?topicId=RB0002. Investors are strongly encouraged to review this information before investing.

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition,the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendationor view in this report. Parag Thatte, Srineel Jalagani, Hallie Martin, Binky Chadha

Equity Rating Key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holderreturn (TSR = percentage change in share price from currentprice to projected target price plus pro-jected dividend yield ) ,we recommend that investors buy the stock.Sell: Based on a current 12-month view of total share-holderreturn, we recommend that investors sell the stock.Hold: We take a neutral view on the stock 12-months out and,based on this time horizon, do not recommend either a Buyor Sell.

Newly issued research recommendations and target pricessupersede previously published research.

Additional ETF InformationInformation on ETFs is provided strictly for illustrative purposes and should not be deemed an offer to sell or asolicitation of an offer to buy shares of any fund that is described in this document. Consider carefully any fund'sinvestment objectives, risk factors, and charges and expenses before investing. This and other information can be foundin the fund's prospectus. Prospectuses about db X-trackers funds and Powershares DB funds can be obtained by calling1-877-369-4617 or by visiting www.DBXUS.com . Read prospectuses carefully before investing. Past performance is notnecessarily indicative of future results. Investing involves risk, including possible loss of principal. To better understandthe similarities and differences between investments, including investment objectives, risks, fees and expenses, it isimportant to read the products' prospectuses. Shares of ETFs may be sold throughout the day on an exchange throughany brokerage account. However, shares may only be redeemed directly from an ETF by authorized participants, in verylarge creation/redemption units. Transactions in shares of ETFs will result in brokerage commissions and will generatetax consequences. ETFs are obliged to distribute portfolio gains to shareholders. Deutsche Bank may be an issuer,advisor, manager, distributor or administrator of, or provide other services to, an ETF included in this report, for which itreceives compensation. db X-trackers and Powershares DB funds are distributed by ALPS Distributors, Inc. The opinionsexpressed are those of the authors and do not necessarily reflect the views of DB, ALPS or their affiliates.


https://research.db.com/Research/Disclosures/CompanySearch

https://research.db.com/Research/Topics/Equities?topicId=RB0002

https://research.db.com/Research/Topics/Equities?topicId=RB0002

http://www.DBXUS.com

21 October 2018


Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the"Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.


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21 October 2018


Additional Information

The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively"Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sourcesbelieved to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness. Hyperlinks to third-party websites in this report are provided for reader convenience only. Deutsche Bank neither endorses the content noris responsible for the accuracy or security controls of those websites.??If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this report,or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, Deutsche Bank mayact as principal for its own account or as agent for another person.??Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for itsown account or with customers, in a manner inconsistent with the views taken in this research report. Others withinDeutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those takenin this research report. Deutsche Bank issues a variety of research products, including fundamental analysis, equity-linkedanalysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication may differfrom recommendations contained in others, whether as a result of differing time horizons, methodologies, perspectivesor otherwise. Deutsche Bank and/or its affiliates may also be holding debt or equity securities of the issuers it writeson. Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investmentbanking, trading and principal trading revenues.??Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They donot necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank providesliquidity for buyers and sellers of securities issued by the companies it covers. Deutsche Bank research analysts sometimeshave shorter-term trade ideas that may be inconsistent with Deutsche Bank's existing longer-term ratings. Some tradeideas for equities are listed as Catalyst Calls on the Research Website ( https://research.db.com/Research/ ) , and can befound on the general coverage list and also on the covered company ’ s page. A Catalyst Call represents a high-convictionbelief by an analyst that a stock will outperform or underperform the market and/or a specified sector over a time frame ofno less than two weeks and no more than three months. In addition to Catalyst Calls, analysts may occasionally discusswith our clients, and with Deutsche Bank salespersons and traders, trading strategies or ideas that reference catalysts orevents that may have a near-term or medium-term impact on the market price of the securities discussed in this report,which impact may be directionally counter to the analysts' current 12-month view of total return or investment return asdescribed herein. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipientthereof if an opinion, forecast or estimate changes or becomes inaccurate. Coverage and the frequency of changes inmarket conditions and in both general and company-specific economic prospects make it difficult to update research atdefined intervals. Updates are at the sole discretion of the coverage analyst or of the Research Department Management,and the majority of reports are published at irregular intervals. This report is provided for informational purposes only anddoes not take into account the particular investment objectives, financial situations, or needs of individual clients. It is notan offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy.Target prices are inherently imprecise and a product of the analyst ’ s judgment. The financial instruments discussedin this report may not be suitable for all investors, and investors must make their own informed investment decisions.Prices and availability of financial instruments are subject to change without notice, and investment transactions can leadto losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency otherthan an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is notnecessarily indicative of future results. Performance calculations exclude transaction costs, unless otherwise indicated.Unless otherwise indicated, prices are current as of the end of the previous trading session and are sourced from localexchanges via Reuters, Bloomberg and other vendors. Data is also sourced from Deutsche Bank, subject companies, andother parties.??The Deutsche Bank Research Department is independent of other business divisions of the Bank. Details regarding ourorganizational arrangements and information barriers we have to prevent and avoid conflicts of interest with respect toour research are available on our website ( https://research.db.com/Research/ ) under Disclaimer.?


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?Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promiseto pay fixed or variable interest rates. For an investor who is long fixed-rate instruments (thus receiving these cashflows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thuscause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, thehigher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among themost common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, clientsegmentation, regulation (including changes in assets holding limits for different types of investors), changes in taxpolicies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or liquidation ofpositions), and settlement issues related to local clearing houses are also important risk factors. The sensitivity of fixed-income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, toFX depreciation, or to specified interest rates – these are common in emerging markets. The index fixings may – byconstruction – lag or mis-measure the actual move in the underlying variables they are intended to track. The choice ofthe proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i.e., coupons indexedto a typically short-dated interest rate reference index) are exchanged for fixed coupons. Funding in a currency that differsfrom the currency in which coupons are denominated carries FX risk. Options on swaps (swaptions) the risks typical tooptions in addition to the risks related to rates movements.??Derivative transactions involve numerous risks including market, counterparty default and illiquidity risk. Theappropriateness of these products for use by investors depends on the investors' own circumstances, including theirtax position, their regulatory environment and the nature of their other assets and liabilities; as such, investors shouldtake expert legal and financial advice before entering into any transaction similar to or inspired by the contents of thispublication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of thehigh degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than theamount of funds initially deposited – up to theoretically unlimited losses. Trading in options involves risk and is notsuitable for all investors. Prior to buying or selling an option, investors must review the "Characteristics and Risks ofStandardized Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp . If you are unable toaccess the website, please contact your Deutsche Bank representative for a copy of this important document.??Participants in foreign exchange transactions may incur risks arising from several factors, including the following: (i)exchange rates can be volatile and are subject to large fluctuations; (ii) the value of currencies may be affected by numerousmarket factors, including world and national economic, political and regulatory events, events in equity and debt marketsand changes in interest rates; and (iii) currencies may be subject to devaluation or government-imposed exchange controls,which could affect the value of the currency. Investors in securities such as ADRs, whose values are affected by thecurrency of an underlying security, effectively assume currency risk.?

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity inthe investor's home jurisdiction. Aside from within this report, important conflict disclosures can also be found athttps://research.db.com/Research/ on each company ’ s research page. Investors are strongly encouraged to review thisinformation before investing.

Deutsche Bank (which includes Deutsche Bank AG, its branches and affiliated companies) is not acting as a financialadviser, consultant or fiduciary to you or any of your agents (collectively, “You” or “Your”) with respect to any informationprovided in this report. Deutsche Bank does not provide investment, legal, tax or accounting advice, Deutsche Bank is notacting as your impartial adviser, and does not express any opinion or recommendation whatsoever as to any strategies,products or any other information presented in the materials. Information contained herein is being provided solely on thebasis that the recipient will make an independent assessment of the merits of any investment decision, and it does notconstitute a recommendation of, or express an opinion on, any product or service or any trading strategy.

The information presented is general in nature and is not directed to retirement accounts or any specific person or accounttype, and is therefore provided to You on the express basis that it is not advice, and You may not rely upon it in makingYour decision. The information we provide is being directed only to persons we believe to be financially sophisticated,who are capable of evaluating investment risks independently, both in general and with regard to particular transactionsand investment strategies, and who understand that Deutsche Bank has financial interests in the offering of its products


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21 October 2018


and services. If this is not the case, or if You are an IRA or other retail investor receiving this directly from us, we askthat you inform us immediately.

In July 2018, Deutsche Bank revised its rating system for short term ideas whereby the branding has been changed toCatalyst Calls (“CC”) from SOLAR ideas; the rating categories for Catalyst Calls originated in the Americas region havebeen made consistent with the categories used by Analysts globally; and the effective time period for CCs has beenreduced from a maximum of 180 days to 90 days.

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Equity Research

Jim ReidGlobal Head of

Thematic Research

Francis YaredGlobal Head ofRates Research

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Economics Research

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and QIS Research

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