Deutsche Bank AG aims to launch exchange-traded funds (ETFs) in at least three Asian markets within six months, with the aim of becoming a top-three player in the region by 2011.
The German lender which counts itself as the No 3 ETF provider in Europe, is looking to enter the Hong Kong market within "weeks, not months" and later move into Singapore and Japan, said Thorsten Michalik, head of the firm's db x-trackers unit.
Existing ETF providers in Asia include the Barclays Global Investors unit of UK bank Barclays Plc, State Street Corp and Societe Generale's Lyxor unit.
"Given the proven track record and the brand of Deutsche in Asia there's no doubt that we will be one of the top three players within the next two to three years," Michalik told Reuters in an interview.
He declined to provide details of the ETFS to be launched, citing regulatory and competitive reasons. ETFs are used by many investors as a low-cost alternative to mutual funds, and are viewed by some fund houses as a competitive threat. Most ETFs aim to passively track the performance of market indexes, but have the advantage of being tradable on an exchange.
Their popularity stems in part from their low fees and the failure of many actively managed funds to beat the average return of the market over the long term.
The range of ETF offerings has exploded in recent years, expanding to track other asset classes such as fixed-income and commodities. Some ETFs are now actively managed and use derivatives to allow investors to short indexes.
More than $800 billion is invested globally in ETFs, according to fund tracker Lipper, a Thomson Reuters company. But the product is far less popular in Asia than in the more developed US and European markets.
A Deutsche research report released in Hong Kong on August 20 showed ETF assets under management in Asia were just under $64 billion at the end of June. Japan was the largest market with $36.5 billion in 41 ETFs, followed by Hong Kong with $13.7 billion in 23 products.
The report predicted the overall total could grow to $85 billion by the end of 2010. Michalik said this expansion will be driven partly by greater variety as providers increase the range of ETFs to include more tracking non-Asia markets and asset classes other than equities.
"We've solved the chicken and egg problem. It's very simple. How can a market really kick off if there are not enough products around? This is the first thing you have to solve," he said. The Frankfurt-based executive, who helped build Deutsche's warrant business in Asia earlier this decade, noted the company launched its db x-trackers product line in January 2007 with just eight products.
The product line has since expanded more than 10-fold and has raised 15.1 billion euros ($22.3 billion) in assets. Michalik said the firm has been able to add assets even in a downturn in equities, which bodes well for its expansion plans in Asia.