In a sign of intensifying competition in the index and exchange-traded funds market, db x-trackers has announced that it is cutting the total expense ratio on its DJ Euro Stoxx 50 ETF from 0.15% per annum to zero, with effect from Monday 20 July.  The fee cut will apply to both the distributing (dividend-paying) and accumulating share classes of the fund.

The DJ Euro Stoxx 50 is the most widely-used benchmark index for large-cap European equities.  Ten European ETF issuers currently offer funds tracking the index, with fees ranging from 0.10% per annum to 0.36% per annum, and over €13 billion invested in total. The db x-trackers DJ Euro Stoxx 50 ETF has €1.5 billion under management, with iShares (€6.3 billion) and Lyxor (€4.4 billion) operating the largest competing funds.

In a press release, db x-trackers pointed out that, since the launch of its DJ Euro Stoxx 50 ETF in January 2007, the fund has outperformed the underlying index by 0.61% per annum, after fees.

Manooj Mistry, head of db x-trackers in the UK, explained to IndexUniverse.eu that this outperformance is achieved by Deutsche Bank’s ability to extract revenues and efficiencies from the underlying stocks in the index, for example through securities lending or the ability to achieve a better dividend rate, once withholding taxes are taken into account.  The bank retains a portion of these extra revenues, allowing it to afford the current cut in the fund’s headline fee rate, Mistry added.