"Investors will then have a total of 14 listed DWS products that they can use to diversify their fund portfolios by region and sector," said Udo Behrenwaldt, speaker of the board of managing directors of DWS Investment GmbH. "Exchange trading in our funds makes it possible to buy international portfolios at current market prices, which would cost much more in terms of transaction costs if the investment were made directly on the exchanges in the respective home markets of the components." There is no comparable offering on any other exchange worldwide.
In April 2000, Deutsche Börse was the first European exchange to introduce a segment for exchange trading in funds. In November 2000, DWS was the world's first fund company to list actively managed funds on an exchange. Some two years since the launch of the actively managed funds, Deutsche Börse has a positive assessment of the performance in this segment. In the meantime, there are 16 actively managed funds listed in XTF by three issuers, as well as another 58 passive index funds.
Volker Potthoff, the Deutsche Börse Executive Board member responsible for XTF, said: "The success of the actively managed funds in XTF since November 2000 shows that investors have recognized, and appreciate, the advantages of this channel for their orders and an alternative price formation system." Investors can buy and sell fund shares at current prices in continuous trading, which gives them the same room for trading as they have with individual equities, he said. It is also possible to make orders subject to the limits that are usual for other orders on the exchange. This is a decisive advantage, especially for trading-oriented investors, he added.
In 2001 as a whole, DWS achieved a net inflow of 94 billion euros in funds over the stock exchange. During the first eight months of the current year, the figure was 52 billion euros compared with 51 billion euros for the same period of last year. DWS is benefited by the breadth of its product offerings. For example, due to market conditions and the higher gold price, the stock-exchange turnover in DWS Goldminenaktien Typ O by the end of August was already more than three times higher than the figure for the year 2001 as a whole.
A comparison of actively managed and passive funds reveals differences between the two product groups. The number of transactions per product, for example, is much higher in the case of the active products than for the passive products, with a lower trading volume overall. An evaluation for the month of August showed an average of 1,080 transactions per fund, as compared with 662 for the index products. It can thus be concluded that there is a higher percentage of private investors in trading with active funds, whereas more institutional investors are invested in the passively managed funds. The fund volumes, on the other hand, are more or less the same in the two product groups. The situation is balanced; at the end of July, the total volume of actively managed funds came to 4.2 billion euros compared with 3.9 billion euros for the passive funds; six of the 10 biggest equity funds in the XTF segment are actively managed.
The price formation process for investment funds through the stock exchange has proved worthwhile. Unlike the price set by the depositary bank for fund shares, the stock-exchange price reflects the daily stock-market prices of the equities contained in the fund as well as current market trends. This is why the price determined by the depositary bank at midday generally differs slightly from the price determined at the same time on the stock exchange. According to one DWS evaluation, this deviation amounts to a maximum of 0.5 percent. This means that the stock-exchange price is very close to the call price of the fund, there is no mark-up. The bid-ask spreads set by the Designated Sponsors range between 0.5 and 1.5 percent for the actively managed funds and are thus much narrower than the maximum spread set by the issuer.
