Industry Updates

DWS cuts fees on revamped global aggregate bond ESG ETF

Fees cut due to “high inflows” over the past two years

Theo Andrew

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DWS has reduced fees on its global aggregate bond ETF after switching the index to one that tracks ESG metrics.

The €570m Xtrackers Global Aggregate Bond Swap UCITS ETF (XBAG), which will be renamed the Xtrackers ESG Global Aggregate Bond UCITS ETF under the same ticker, will see its total expense ratio (TER) reduced from 0.15% to 0.10% in the primary 1D share class and 0.20% to 0.15% in the remaining share classes.

It comes after, DWS announced last November that XBAG would switch from tracking the Bloomberg Global Aggregate Bond index to the Bloomberg MSCI Global Aggregate Sustainable and SRI Currency Neutral index, due to low investor demand.

It said the reduction in TER was made “to pass on to investors the cost advantages of high inflows” since it launched in 2014.

Furthermore, the index replication of XBAG will also switch from synthetic to physical. The ETF will be classified as Article 8 under the Sustainable Financial Disclosure Regulation.

DWS confirmed there would be no securities lending on the product. 

XBAG will exclude issuers that do not fulfil specific ESG requirements including those with insufficient MSCI ESG ratings, those deemed severely controversial and businesses whose activities are “inconsistent with certain social responsibility criteria”.

It will also exclude issuers that generate more than 0% revenue from thermal coal, oil and gas or 10% from tobacco.

In addition, it will exclude any issuers that generate more than 10% or more electricity from thermal coal or 30% from nuclear power.

Simon Klein, head of passive sales at DWS, said: “In our view, the XBAG offers a very attractive combination for investors who want to track the entire investment-grade bond market with just one ETF, and at the same time stringently comply with sustainability criteria.

“This is a very good example of how we continue to develop our ETFs to meet investor needs.”

DWS is the second ETF issuer in Europe to offer exposure to a global aggregate bond index with an ESG tilt. Last August, BlackRock launched the iShares Global Aggregate Bond ESG UICTS ETF (AGGE) which tracks the Bloomberg MSCI Global Aggregate Sustainable and Green Bond SRI index.

It is one of several ESG index switches the German asset manager has undertaken across its equity and fixed income ranges.

In January, the firm proposed a sustainable index switch on the Xtrackers iBoxx USD Corporate Bond Yield Plus UCITS ETF (XYLD).

This was followed a month later by the announcement it would be tightening the exclusion criteria on three corporate bond ESG ETFs to ensure a certain percentage of companies in the investment universe are screened out.

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