Michael Mohr, global head of Xtrackers products at DWS, has said issuers are ramping up competition in the European ETF market with recent fee cuts across products.
Speaking to ETF Stream, Mohr said the group gave up revenues with its recent ETF fee cuts in a bid to boost inflows into its products.
He added there were several reasons the firm decided to reduce fees recently including undercutting its rivals to generate more flows.
The German asset manager slashed the total expense ratios (TERs) across 31 ETFs and one exchange-traded commodity (ETC) earlier this month, creating the cheapest gold ETC on the market.
It came just over a month after State Street Global Advisors (SSGA) cut fees on three S&P 500 ETFs, making the SPDR S&P 500 UCITS ETF (SPY5) the lowest-priced ETF in Europe.
“It is important to improve the value for our investors,” Mohr said. “We need to look at how attractive competitor products are because ultimately we need to get flows into our products.”
“Where we believe we have good products but lack flows then maybe price can be one component.”
He added the group was taking a revenue hit following the move but that it was something it “had to do” to match its rivals.
“It is very simple, we give up revenues in the first place which nobody does for fun but it is something you have to do to stay in the market.
“Along with the quality of our products, we try to grow with investors, and if we can achieve that then we will make up for the revenues we have given away.”
Also speaking to ETF Stream, Monika Calay, director of passive research at Morningstar, called the move a win-win for investors but added it is important to look beyond fees when selecting ETFs to factors such as replication methodology.
“Synthetic S&P 500 ETFs tend to outperform their physical peers even though they are more expensive due to their tax advantage on US dividends,” she explained.
