DWS blames ‘timing’ for its heavy ETF outflows this year
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DWS has suffered near-record exchange traded fund outflows this year, even as the European industry as a whole attracted net inflows of almost €60bn.
Xtrackers, DWS’s ETF business, had net outflows of €4.8bn between January and the end of October, according to Morningstar data. European ETFs overall had net inflows totalling €58.9bn over the same period.
ETF providers are on course to have their lowest combined level of subscriptions in Europe since 2018, with DWS being the main drag on the sector.
DWS attributed its relatively poor sales to “timing”, saying the firm’s clients had started to reduce their allocations to equities in the first half of 2022, ahead of other ETF providers’ clients.
DWS said: “[Outflows were driven by] well-known global issues financial markets are facing”.
“This risk-off movement became a topic for the ETF industry as a whole later on. The difference in timing is the main reason [for] the different flow patterns between Xtrackers ETFs and others.”
The German asset manager’s ETF business has only twice experienced net outflows over a calendar year, Morningstar data suggest. The firm had net outflows of €4.9bn in 2016 and €4.4bn in 2013.
Jose Garcia-Zarate, associate director of passive strategies at Morningstar, agreed that 2022 was “not proving a great year in flow terms for most ETF providers”.
However, Garcia-Zarate was not convinced by the argument that the disparity in flows between DWS and other firms was “down to unfortunate timing”.
He said that while it was difficult to “pinpoint” a specific cause, accusations of greenwashing levelled against DWS, albeit for its actively managed funds, “may have put off some investors from investing in DWS funds irrespective of management style”.
The former chief executive of DWS Group resigned in June after the company’s offices were raided by police following accusations of greenwashing, which it denies.
Garcia-Zarate added that DWS had experienced outflows from its mainstream equity ETFs and inflows into its environmental, social and governance products, “though not in equal measure”.
“But this pattern is something we have seen in other providers too this year,” he said.
Many of Xtrackers’ largest peers have had net inflows to their European ETFs so far this year.
BlackRock’s iShares is the best-selling firm, with inflows of €32.9bn, ahead of Vanguard with €9.1bn and Invesco with €6.4bn.
UBS and WisdomTree are among Europe’s 10 largest firms that have suffered redemptions, with net outflows of €1.5bn and €3.5bn respectively.
Meanwhile, strong inflows to some smaller ETF providers have boosted their growth this year.
ETF assets for JPMorgan Asset Management and Franklin Templeton have grown by almost 40 per cent each, while HanETF has grown by 20 per cent.
Michael O’Riordan, founding partner of Blackwater Search and Advisory, said that for firms the size of JPMorgan and Franklin he “would expect nothing else” than healthy growth.
“Both firms have really invested in their ETF business — and sooner or later that is going to pay off,” O’Riordan said.
*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at igniteseurope.com.