By Asjylyn Loder

Deutsche Bank AG's exchange-traded funds are enjoying a resurgence.

The bank's X-trackers ETFs took in $424 million December and January, the first monthly inflows in almost a year, according to fund research firm Morningstar Inc. One of Deutsche Bank's specialties -- currency-hedged ETFs that buy overseas companies -- has attracted investors who are worried that the U.S. market is overheated but don't want to risk the volatility of the currency markets. Or, as the firm billed the 2015 launch of its hedged Japan ETF, it's "Japan Minus Yen."

"Currency hedging reduces the volatility of international investing," said Fiona Bassett, managing director and head of the bank's passive asset management division in the Americas.

A little more than three years ago, Deutsche Bank, a top 10 player in ETF assets world-wide, redoubled its efforts to expand in the $2.7 trillion U.S. ETF market, and inflows accelerated. While troubles at the parent bank have weighed on the asset-management business, Deutsche Bank's U.S. ETFs have grown to $13 billion. That outpaced other recent entrants such as JPMorgan Chase & Co. and Goldman Sachs Group Inc., although it is still small fry compared with giants Vanguard Group and BlackRock Inc.

In the years since the financial crisis, some of the world's biggest banks have been expanding in asset management, looking for stable revenue to offset volatile earnings in trading and investment banking. John Cryan, Deutsche Bank's chief executive, has emphasized that he views asset management as a keeper, and singled out ETFs as an area of growth.

"The prospects of our ETF platform in 2017 are positive," Mr. Cryan said during a Feb. 2 earnings call.

The X-trackers funds are the latest foray into U.S. ETFs for Deutsche Bank, which sold its PowerShares commodity business to Invesco Ltd. in 2015. Assets in the bank's U.S. X-trackers ETFs hit a peak of $21 billion in November 2015.

While Deutsche Bank still has more assets than its banking peers in ETFs, investors pulled more than $6 billion from its ETFs last year. Ms. Bassett blamed the outflows on volatile currency markets. Similar products from her competitors likewise fell out of favor last year.

The 2016 outflows were another blow for Deutsche Bank, which is undergoing a painful restructuring. In December, the bank reached a $7.2 billion agreement with the U.S. Justice Department to settle claims that it packaged and sold toxic mortgages to investors in the years before the financial crisis.

This past month, the bank slashed bonuses and said managing directors would receive no individual bonuses at all, though a limited number of people were granted special long-term incentives. (Ms. Bassett, a managing director, declined to discuss the topic.)

Whether the bank's wider problems will hurt the U.S. ETF business remains to be seen. Late last year, Deutsche Bank lost Alex Depetris, chief operations officer and chairman of the board for the bank's U.S. X-trackers business, to Oppenheimer.

"Everyone is always bidding for talent," Ms. Bassett said. She pointed out that Deutsche Bank hired 11 people in the past year including Robert Brooks, formerly the national sales manager at Invesco Ltd., and recently poached David Stack from State Street Corp.

Deutsche Bank is planning to add product developers, sales staff, research analysts and portfolio managers in the next year, and Ms. Bassett doesn't foresee any difficulty in attracting candidates.

"People love to build things," Ms. Bassett said.

(END) Dow Jones Newswires

February 27, 2017 05:44 ET (10:44 GMT)

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