Deutsche Bank has announced it has cut its management fees on its exchange traded funds (ETFs), the dbX-trackers.
Deutsche Bank offers a range of five passive investments that track offshore indices.
On the company’s flagship ETF, which tracks the MSCI World Index, the maximum management fees have been decreased from one percent plus VAT a year to 0.6 percent plus VAT. For investment amounts of over R100 million, the fee decreases to 0.4 percent.
On the other four ETFs, the fees have been reduced from one percent plus VAT a year to 0.75 percent plus VAT for amounts up to R10 million and 0.6 percent plus VAT for amounts up to R100 million, when a 0.4 percent fee applies. The fee reductions apply from July 1.
Wehmeyer Ferreira from Deutsche Securities said fee reductions were made possible by economies of scale resulting from asset growth.
“In the year to the end of May, our funds achieved over 60 percent asset growth. Total assets under management top R3.195 billion and we project strong continued net inflows,” he says.
dbX-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.
Ferreira says the growth in the use of the dbX-trackers is a result of a greater understanding of the advantages of using passive investments, greater sensitivity to costs among consumers, greater appreciation of the benefits of international diversification and the weakness of the rand.
Ferreira says institutional investors in particular are focused on costs and net yield. He therefore expects an increase in the inflows into the ETFs as a result of the new fee schedule.
Deutsche Bank’s announcement follows one made by ETF administrator AOS recently, which is also good news for ETF investors.
Through various providers, AOS provides investment plans for ETF investors who have smaller amounts to invest. These are offered as an alternative to buying ETFs through a stockbroker, which is not cost-effective for the smaller investor.
AOS announced reductions in the fee it charges investors to use its platform, ranging from 0.05 percentage points to 0.2 percentage points, depending on the amount you invest.
Using an AOS-administered investment platform will add between 0.4 percent and 0.7 percent a year to the cost of your ETF investment.