Potential CFTC Regulations Prompt Fee Hikes in ETFs

Investors and exchange traded fund (ETF) providers are still awaiting a decision on commodity funds by the Commodity Futures and Trading Commission (CFTC). One provider is pre-emptively hiking fees in the meantime.

Deutsche Bank Commodity Services is raising rates on seven of their PowerShares ETFs. If the CFTC were to enact position limits on ETFs that trade futures on various commodities, it could lead to higher costs for investors as providers find ways to come in under those limits. (What regulations could mean).

In August, DB said that the composition of some of its funds were being changed as a result of the CFTC ending their right to exceed limits on holdings in wheat and corn. As a result, PowerShares DB Agriculture (NYSEArca: DBA) had to change the number of commodities it owns from four to 11.

The hikes will also affect:

• PowerShares DB Commodity Tracking Index (NYSEArca: DBC)
• PowerShares DB Oil (NYSEArca: DBO)
• PowerShares DB Gold (NYSEArca: DGL)
• PowerShares DB Silver (NYSEArca: DBS)
• PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP)
• PowerShares DB U.S. Dollar Bearish (NYSEArca: UDN)

The fees in DBA and DBC will rise from 0.75% to 0.85%. Fees in other ETFs will increase from 0.50% to 0.75%, reports Cinthia Murphy for Index Universe. (How commodity ETFs can get around regulations).

The new fees will take effect on Jan. 4.

ETFs are still, on average, cheaper than mutual funds, and these and other commodity ETFs remain an easy and cost-effective way to gain exposure. Fees are just one thing an investor should consider when it comes to shopping for ETFs – also important are trading volume, assets under management and whether the fund’s construction works for your individual goals. (Why individual investors are taking to ETFs).

For more stories about commodities and the CFTC regulations, visit our commodity ETF category.