Fees Up On Some PowerShares DB ETFs

December 09, 2009

 

Come Jan. 4, investors will have to shell out a little more in management fees for some PowerShares DB commodities-linked ETFs.

The two most popular PowerShares DB ETFs—the PowerShares DB Agriculture Fund (NYSEArca: DBA) and the PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC)—will see their expense ratios rise from 0.75 percent to 0.85 percent.

The change in the cost structure is being attributed in part to a CFTC decision earlier this year to clamp down on the funds' role in the agricultural futures market. For the first three years of their existence, both DBA and DBC were "exempt" from federal position limits in the agricultural space. But as pressure mounted on the commission to crack down on commodity investing, it revoked these exemptions.

As a result, both DBA and DBC had to significantly revamp their portfolios; in the case of DBA, it expanded the number of commodities it owned from four to 11. That may explain in part the fee hike.

But DBA and DBC aren't the only funds whose costs are going up. In a filing with the SEC, Deutsche Bank announced that annual management fees for PowerShares DB Oil Fund (NYSEArca: DBO), PowerShares DB Gold Fund (NYSEArca: DGL) and PowerShares DB Silver Fund (NYSEArca: DBS) will go from 0.50 percent to 0.75 percent.

In addition, fees on the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) and the PowerShares U.S. Dollar Index Bearish Fund (NYSEArca: UDN) will rise from 0.50 percent to 0.75 percent as well.

The latter case is the most puzzling. For all the commodity funds, you could argue that ongoing concerns about regulatory pressures have raised the costs of operating in the commodity futures markets. But UUP and UDN invest in currency futures, which are not subject to any new regulatory actions.

The funds also have been attracting significant assets recently, making the fee hike that much more puzzling.

Fees for the PowerShares DB Energy Fund (NYSEArca: DBE), PowerShares DB Precious Metals Fund (NYSEArca: DBP) and PowerShares DB Base Metals Fund (NYSEArca: DBB) will remain unchanged.

You can see the filing here.

 

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