DWS Shutters ESG, International ETFs
DWS Group, the asset manager that operates the Xtrackers ETF brand, is closing six ETFs, including three ESG-focused funds, after they failed to bring in significant inflows, the company said Monday.
The firm said that the six ETFs will officially shutter March 13 and liquidate on March 22. The ESG funds include the Xtrackers Bloomberg US Investment Corporate ESG ETF (ESCR), the Xtrackers J.P. Morgan ESG Emerging Markets Sovereign ETF (ESEB), and the XTrackers J.P. Morgan ESG USD High Yield Corporate Bond ETF (ESHY). The firm is also shuttering its Xtrackers MSCI China A Inclusion Equity ETF (ASHX), the Xtrackers MSCI All China Equity ETF (CN), and the Xtrackers MSCI Germany Hedged Equity ETF (DBGR).
While funds that track companies that align with sustainable environmental, social, and governance (ESG) grew more popular in 2021, the group of ETFs has since struggled. Conservative political backlash has been one headwind, along with regulatory scrutiny and criticism of overblown fees.
Investors have also fleed the funds due to high management fees for portfolios that are similar to other passive indexes.
Closures of ESG ETF funds have jumped in the past year, while the number of openings of new funds using the ESG label has also declined. According to Bloomberg Intelligence data, $4.3 billion was drained from ESG-focused funds in 2023, and 36 ESG focused ETFs were liquidated in 2023. Goldman Sachs Asset Management and BlackRock Inc. have also shuttered ESG funds in the past year.
Despite the backlash against the ESG label, investors remain interested in investing in sustainable technology. A survey from Sage Advisory Services found that seven of 11 ETF providers said that ESG was still a first or second priority for their firms, and that 40% of recent ETF launches included themes like low carbon emission, clean energy, and biodiversity.
On Tuesday, DWS launched its first actively managed ETF, the Xtrackers RREEF Global Resources ETF (NRES), which offers exposure to natural resources commodities, including metals, energy, and agriculture, according to the firm’s press release.
International Fund Closures
DWS’s “All China Equity ETF” was also among the closures. The ETF aimed to make it easier for investors to get broad exposure to the Chinese market.
In a post Tuesday on the social media platform X/Twitter, Eric Balchunas, Senior ETF Analyst at Bloomberg wrote that “many of us ETF nerds thought [it] was the holy grail for China ETFs bc it finally merged the disparate alphabet soup of shares (A, H, N, P-chip etc).”
Yet since its unveiling in 2014, the fund has been able to accumulate only about $6 million in assets, according to recent etf.com data.
Contact Lucy Brewster at lucy.brewster@etf.com.
