Deutsche ETF arm has painful 2013

Deutsche Bank was the only leading exchange traded fund provider to experience outflows

Deutsche Bank was the only leading exchange traded fund provider to have experienced outflows in 2013, after investors pulled $4.6bn from its passive business.

The German bank’s European rivals, by contrast, attracted billions of dollars to their ETF businesses in the first 11 months of the year, figures from ETFGI, the data provider, show.

Amundi, UBS and Source raised $1.2bn, $1.4bn and $2.9bn respectively over the same period. Lyxor experienced $531m of inflows.

US groups fared even better, with investors pouring $59bn into BlackRock’s ETF range, $55bn into Vanguard’s and $34bn into State Street’s.

No other ETF provider in the global top 20 by assets under management experienced net outflows.

Simon Klein, Deutsche’s head of exchange-traded product sales in Asia, Europe, the Middle East and Africa, said the group’s recently announced shift to physically replicated ETFs should help it return to “solid inflows in 2014”.

The bank also emphasised that the outflows stemmed predominantly from profit-taking in its Dax ETF, which is “part and parcel of running a large passive funds business”.

Analysts, however, point out that even without withdrawals from the Dax fund, flows to Deutsche’s ETF business were comparatively low last year.

Ben Seager-Scott, senior research analyst at BestInvest, the financial adviser, said that Lyxor, Deutsche’s main competitor in the synthetic ETF industry, has been “more innovative and arguably more proactive in terms of marketing and engaging with clients”.

“The distribution channels Lyxor has been using have been a bit slicker, and Deutsche has not done that much in the alternative-beta space, which was a big theme in 2013,” he added.

There are also doubts about Deutsche’s success in competing with established participants in the physically replicated ETF market to boost inflows.

Ali Masarwah, a research analyst at Morningstar, the data provider, said: “Isn’t it too late for Deutsche to try and reverse its fortunes by doing what iShares and State Street have been doing all along?

“Deutsche has a bit of an edge on pricing, but I don’t think this will tip the scale and convince huge numbers of investors to abandon iShares.”

Mr Seager-Scott is similarly cautious about Deutsche’s chances of success. “Deutsche may have come too late to the physically replicated party,” he said.

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