GERMANY - DekaBank, the asset manager for German savings banks (Sparkassen), plans to roll out exchange-traded funds (ETFs) for German institutional investors in the first quarter of 2008. The launch is subject to regulatory approval.

"Our ETFs will be directed to all typical institutional investors, including the Sparkassen, other banks, insurers and pension funds," a spokesman for DekaBank in Frankfurt said, adding that the manager was getting into the market due to its growth potential.

He provided no further details - such as type of ETFs to be launched or target volume - on the new products.

Passive investment products, ETFs track main stock market indices. They are catching on with German institutional investors because of the transparency from getting a market (or beta) return and because fees are lower than for actively managed funds.

The average fee for an ETF is in Germany 15 bps. This compares with 20 bps for institutional bond mandates and 35 bps for equity mandates.

Last October saw one of the biggest ETF mandates in Germany wben the pension scheme of auto component maker Continental invested €300m in ETFs provided by Indexchange, a unit of Barclays Global Investors, Germany's biggest provider of the products.

Munich-based Indexchange commands 48% of the German ETF market. It is followed by Société Générale subsidiary Lyxor AM of and Deutsche Bank.

DekaBank's announcement came amid market reports that several staff have left Indexchange to set up the new ETF business at the Sparkassen's asset manager. Indexchange had no comment on the speculation.

Topics