IU.eu: Ralph, what prompted Commerzbank to enter the ETF market with Comstage?

Stemper: Commerzbank is one of the leading issuers of listed derivatives for retail investors in Germany, and Comstage has developed from the equity derivatives business of the bank, which is headed by Thomas Timmermann. We have been looking at the ETF business for a number of years, and finally decided that it was big enough and attractive enough in Germany for us to join. We already had the platform to do this—as market maker for 80,000 derivatives and 1,500 mutual funds, and as market maker for around 300 ETFs of other providers, such as db x-trackers, iShares, Lyxor—so from a technical point of view it wasn't difficult to get started. We needed to set up the fund company and marketing operation, which we did, and on 8 September we launched our first ETFs.

We started with 27 ETFs, those being the main indices, like the DAX, Eurostoxx 50, Dow Jones Industrial Average, Nikkei 225, the eighteen sector sub-indices from the DJ Stoxx 600 and two money market funds. The Stoxx 600 real estate index was launched shortly after, and we added an ETF to track that as well.

In December we added another 22 funds, bringing our total fund range to 50 within four months of our launch, which we are happy with.

IU.eu: How have the assets under management grown?

Stemper: By end-December, we had €1.88 billion under management.

IU.eu: Was there any seeding of the funds?

Stemper: Isn't there always some seeding? We were also helped in raising assets by the change in tax regulations that took place at year-end. Before 1 January 2009, if you bought a fund or an ETF and held it for longer than a year, any gain would be tax-free. Since then, there's a 25% tax rate on everything, irrespective of how long you hold for. So this encouraged a lot of cash to come into ETFs before year-end, and a lot of our inflows came in the last few weeks of 2008.

From the beginning, we have tried to attract retail investors to ETFs. The German ETF market has been largely institutional, since iShares listed their first funds here in 2001, and we want to make this market more familiar to the broader public. Our second tranche of ETF launches in December, with a lot of MSCI index trackers, was more institutional in focus, while our leveraged and short EuroStoxx 50 ETFs are more popular with retail investors. So we want to cover both sectors of the market.

IU.eu: You mentioned Comstage's origins within the equity derivatives business at Commerzbank—does this mean that most of your ETFs will be equity-based?

Stemper: Not at all. We have a focus across the asset classes. We have two money market ETFs among our existing funds, and we will certainly be adding to the non-equity funds.

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