db X-trackers cuts fees on its ETFs
The Deutsche Bank-sponsored range of Exchange Traded Funds (ETFs), db X-trackers, has cut its management fees on its JSE- listed ETFs that are already based on lower charges than actively managed investment products.
ETFs are passive investment structures designed to track the performance of specific indices, delivering market performance at affordable rates as investors don¡¦t have to pay a premium on the promise of excess returns to the market.
db X-trackers comprise five ETFs, each linked to an offshore index.
From July 1, the maximum management fee (previously 1.00% plus VAT) came down to 0.60 % plus VAT on the firm¡¦s flagship fund, the db x-tracker MSCI World Index ETF and down to 0.75% plus VAT on its other ETFs.
Wehmeyer Ferreira from Deutsche Securities said fee reductions were made possible by economies of scale resulting from asset growth.
He added: ¡§In the year to the end of May, our funds achieved over 60% asset growth. Total assets under management (AUM) top R3.195 billion and we project strong continued net inflows.
¡§A key element in our market strategy is the affordability of ETF fees versus actively managed alternatives and, as we have reached critical mass allowing economies of scale, we have chosen to reduce our fees.¡¨
New fee structures for JSE listed db X-trackers reduce the gap with international listed ETFs, a category of investment that has enjoyed substantial growth across major investment markets in recent years, delivering the volumes that enable lower fees.
Ferreira attributed local growth over the last year to four factors:
„X Greater understanding of the advantages of exposure to passive investments like tracker funds as history shows most actively managed funds fail to beat the market average over the long haul
„X Greater cost sensitivity by investors who now realise total returns are greatly reduced once fees are subtracted
„X Greater appreciation of the benefits of international diversification as a strategic imperative when portfolios are being constructed
„X Rand weakness ¡V underlining the benefit of exposure to offshore markets with stronger foreign currencies
Ferreira noted: ¡§We¡¦re witnessing growing interest from both institutional and retail investors. We see the trend as long term, which is why we project continued growth in AUM.
¡§Institutional investors in particular are focused on costs and net yield. We therefore foresee a further uptick in our inflows on the back of our new fee schedule.¡¨
db X-trackers offer ETFs linked to the UK¡¦s FTSE 100, the Euro Stoxx 50, the MSCI Japan Index, the MSCI USA Index and the MSCI World Index.
