DWS’ overnight rate swap ETF has hit the €10bn assets under management (AUM) milestone as flows continued to spike amid a period of higher interest rates over the past 18 months.
Despite the Federal Reserve starting to cut rates this year, the Xtrackers II EUR Overnight Rate Swap UCITS ETF (XEON) has continued to attract investors with most of the attention coming from German retail investors on digital platforms.
XEON’s continued attractiveness despite rate cuts can be tied to the yield curve still staying inverted, with more rate cuts needed before the product becomes less appealing.
The ETF tracks the Solactive €STR +8.5 Daily Total Return index, offering exposure to the interbank rate for one-day loans between 28 EU panel banks in euros, calculated by the European Central Bank.
XEON has more than doubled in assets since the start of the year and recorded inflows of $921m in three weeks to 20 August, according to ETFbook data.
Ferat Öztürk, EMEA head of digital distribution at DWS, said: “A large part of the €4bn year to date inflows result from the digital channels. Those numbers are a strong proof that the product is very well established among retail clients, especially in Germany.
“With a current ESTR interest rate of 3.67% as of 27 August, the Xtrackers overnight ETF provides a higher yield compared to most offers by online banks.
“In terms of future development, we think that as long as there is the “higher for longer” interest rate environment, we would expect this trend to continue unless interest rate levels start to drop sharply.”
DWS previously dropped Deutsche Bank for Solactive as the index administrator on XEON to broaden the number of available swap counterparties.
Elsewhere, VanEck’s defence ETF recently hit the $1bn AUM landmark as military spending continues to ramp up worldwide.
