Last week, Deutsche Bank announced that it will increase the fees of seven PowerShares exchange-traded funds, citing “increased costs of managing the Funds due to changing regulatory requirements.” The changes will be effective beginning January 4, and will affect five commodity funds and two currency products.
| Ticker | ETF | Current Expense | New Expense |
|---|---|---|---|
| DBO | PowerShares DB Oil Fund | 0.50% | 0.75% |
| DGL | PowerShares DB Gold Fund | 0.50% | 0.75% |
| DBS | PowerShares DB Silver Fund | 0.50% | 0.75% |
| UDN | PowerShares DB U.S. Dollar Index Bearish | 0.50% | 0.75% |
| UUP | PowerShares DB U.S. Dollar Index Bullish | 0.50% | 0.75% |
| DBA | PowerShares DB Agriculture Fund | 0.75% | 0.85% |
| DBC | PowerShares DB Commodity Fund | 0.75% | 0.85% |
The increase in expenses will affect commodity funds focusing on oil, wheat, gold, and silver, as well as two currency funds offering exposure to the value of the U.S. dollar relative to a basked of developed market currencies. PowerShares’ diversified commodity ETF will also be impacted.
Fees on the agriculture and commodity products will increase from 0.75% to 0.85%, while the other five funds will see expense ratios rise from 0.50% to 0.75%.
The general consensus in the ETF industry is that the Commodity Futures Trading Commission will implement changes to current commodity exchange regulation in the near future, although no new rules have been announced as of yet. Earlier this year, Deutsche Bank announced that it was changing the composition of some of its funds after the CFTC stripped “no action letters.” The letters had let DB surpass federal caps on holding in wheat and corn.
Bucking The Trend
The move from Deutsche Bank comes as many issuers are trimming expense ratios or introducing products designed to compete on a cost basis. Earlier this month, Geary Advisors slashed the expense ratio on its Texas and Oklahoma ETFs, and UBS, ETF Securities, and Charles Schwab have all introduced new funds in recent months that undercut existing products on the cost side.
It will be interesting to see the impact the price changes have on the popularity of these products. DBA is the largest diversified commodity product available, but it will now have an expense ratio well above some of its competitors. The E-TRACS DJ-UBS Commodity Index Total Return (DJCI) offers exposure to more than a dozen different commodity sectors and charges only 50 basis points in fees. Likewise, the ETFS Silver Trust (SIVR) from ETF Securities charges only only 0.30%, less than half the cost of DBS once the changes take effect.
Disclosure: No positions at time of writing.
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