Thorsten Michalik: raising standards in ETF transparency

Global head of db x-trackers Thorsten Michalik talks to Joanne Young about growing the business from inception and raising standards in ETF transparency

Although Deutsche Bank’s ETF arm made its debut only four years ago, db x-trackers has already propelled its way to the top of the industry, now third in terms of assets under management. Thorsten Michalik has been there since its inception in 2006.

“On the one hand we wanted to improve the existing offering in ETFs, but we also wanted to show that ETFs are not just an equity product,” says Michalik.“We always believed this industry would grow to the stage where people would be using ETFs for asset allocation, and this meant branching out into other asset classes.”

As an investment bank with extensive trading capabilities across markets, Deutsche Bank was well-placed to offer synthetically-replicated products from the outset, drawing from the bank’s swap desk.

“We wanted to articulate an unambiguous message –yes we can offer cheaper and more accurate tracking, but we are also innovative, and that was something we could only do via swaps,” says Michalik.

Testing times
It was during the credit crisis of 2008 that ETFs really started to gain traction with European investors. Michalik explains it was a good testing ground for the products, which remained tradable throughout the period. He says: “The financial crisis was, in one way, an opportunity for the industry to show its strength.”

It was also when much of db x-trackers’ ambition for innovation emerged, with the firm launching ETFs providing exposure to money markets, emerging markets, as well as inverse funds. Michalik considers this an integral part of the industry’s overall success. He says European money market ETFs collectively saw inflows of around €12-14bn in the first couple of months of their existence.

“It was a clear sign that ETFs are more than just long equities – here was a way to park your money,” he says. “Then, when investors gained more confidence in the global economy and wanted to put their money back into markets, there were suddenly six or seven hundred ETFs to choose from across a variety of asset classes, instead of just a handful on mostly European indices.”

Db x-trackers now sits close to world leader iShares and is on the shoulder of second-placed Lyxor in terms of assets under management. Michalik says there is a good chance the firm will soon overtake its closest rival, but insists he focuses more on the rate at which the business is growing, looking at new assets coming in.

One area that has been growing particularly fast is the firm’s commodities platform, db-x ETC. The range has raised around €1.3bn in assets since its debut less than a year ago and is also giving expression to Michalik’s taste for innovation with the recent launch of a euro-hedged gold ETC.