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DWS to launch real estate ESG ETF in Q2

Following client demand for ESG products

Theo Andrew

ESG green finance building

DWS is set to launch a green real estate ETF in the second quarter of 2024 following growing investor demand for ESG products.

In its Q1 2024 results, the German asset manager said the Xtrackers Developed Green Real Estate ESG UCITS ETF would be launched in the coming months.

“In the second quarter of 2024 we will continue to meet our clients’ needs by expanding our ESG offering in the liquid real asset space,” Markus Kobler, chief financial officer of DWS, said.

“Demand for sustainable products continues and is reflected in around 41% of our new fund flows generated by ESG products.”

The group has recorded $66bn inflows into ESG products since its IPO in 2018, despite facing ongoing investigations into greenwashing allegations and a $19m fine by the Securities and Exchange Commission to settle its greenwashing probe.

According to DWS, 61% of these flows were into passive products.

It comes despite a warning from Morningstar earlier this month that ESG ETFs have entered a period of “existential crisis” as flows dwindled over the quarter.

DWS posted another strong quarter with inflows of $8.3bn over the three months to the end of March, according to data from ETFbook.

It said the number of passive funds with assets under management (AUM) of over $1bn grew from 45 to 59 in Q1.

Demand for its Xtrackers EUR Overnight Rate Swap UCITS ETF (XEON) remained strong, pulling in $2.1bn net new assets, the fourth-highest across all ETFs.

Despite the positive flows into its ETFs, the group said passive’s growing share of its product flow mix had a “detrimental impact” on its total fee margin.

Kobler said strong passive inflows and the continued outflows in high-margin products meant its fee margin was flat quarter-on-quarter.

“We are comfortable with changes in overall DWS margin if it is driven by fast-growing lower margin asset classes under the premise those flows are accretive to additional revenues,” he said.

Stefan Hoops, CEO of DWS, added: “We are happy with the strong growth of Xtrackers, even if the flow mix dilutes our average margin.”

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