Industry Updates

Fee pressure continues as Deutsche and BMO cut fund costs

Scott Longley

a pile of metal rods

The fee pressure cooker has been turned up a couple more notches on the news that Deutsche Bank has extended its price reductions to further of its Xtrackers ETF range and BMO has also announced reductions to its offering.

Deutsche Bank's slashing of the all-in fee costs for two more of its range follows on from the news in September when the company cuts the fees on four of its most popular MSCI EMU ETFs.

The unhedged Xtrackers II USD Emerging Markets Bond UCITS ETF has seen its all-in fee move down to 0.25% from 0.35% while the TER (total expense ratio) for the Xtrackers MSCI Europe UCITS ETF falls to 0.12% from 0.25%.

The XTrackers range includes one of the lowest charges in the market - the 0.09% fee attached to the Xtrackers S&P 500 UCITS ETF.

Simon Klein, DWS' head of passive sales, specifically credited the benefit of the "economies of scale" for the price cuts, and the sentiment was echoed by BMO Global Asset Management when it announced late last month reductions in what it called its "ongoing charges figures" for its Income Leaders suite of products.

The US, UK and European funds in questions provide for income generation across differing equity regions and combine the two factors of quality and yield. The fee on the BMO Barclays Global Corporate Bind range have been reduced from 0.30% to 0.17%, a near halving of the costs.

Kevin Gopaul, head of quantitative strategies and ETFs at BMO Global Asset Management, said that as the BMO global business continued to grow, so the company felt it was able to pass on the benefits of lower costs.

The lowering of fees across the European ETF space has been rumbling on all year and looks set to continue. The lowest bar set to date came in the spring when Lyxor opted to re-launch its core range of funds with fees as low as 0.4%.

In the US, meanwhile, the much rumoured move to 0% fees - literally giving the product away - came from Fidelity which launched a no-fee tracker.

Rob Thorpe, managing director and head of distribution and UK intermediaries at BMO, acknowledged that the pressure of the price war was at least partly to be credited for the move.

"We are always listening to clients and are acutely aware that cost is a real focus for many," he said. "As such, through offering our innovative ETFs at this reduced rate, we are able to offer even better value for money in the ETF space."

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