DBS vs StreetTRACKS STI ETF

StreetTRACKS created the first ETF tracking the Straits Times Index in Singapore. As it gained popularity through the years, DBS launched its own STI ETF last month. Investors like me would be wondering what differences do they have. Here’s what I have gathered:

Cost and Lot Size

As already pointed out by Moneytalk, the expense of DBS STI ETF is lower than that of StreetTRACKS’s. 0.28% (DBS) vs 0.3% (StreetTRACKS). The trading lot size is different. DBS’s lot is at 100 while StreetTRACKS’s lot is at 1000. It must be noted that the cost of the fund may change overtime and it is only at this moment that DBS STI ETF gives you a slight saving.

Fund Management

Since both are passively managed funds, there should not be a reliance on the Fund Manager’s skill in picking stocks. That being said, experience is still needed to execute trades properly to buy and sell assets to readjust to the Index as closely as possible. It was also mentioned that both Funds will invest in derivatives if needed to. DBS STI ETF made the limit to 100% of the Fund’s asset which I feel is a very large exposure. It is practically everything can be in derivatives. As for StreetTRACKS, there was no indication on the level or limit of exposure to derivatives.

It was also mentioned that both DBS and StreetTRACKS may readjust their Funds to meet the Index with non-STI shares if required. This can be a double edged sword. On one hand, it gives more choice and flexibility for the Manager to rebalance their funds. On the other, we do not want the Managers to start actively managing the ETFs. It is also likely that this flexibility creates the difference in investment returns.

Bottomline, the tracking errors and investment returns are likely to be different to a small extent between the 2 ETFs.

CPF Investment Scheme

Currently, only StreetTRACKS STI ETF is included under CPF Investment Scheme (CPFIS). This means you can invest using your CPF monies. I believe DBS would get their ETF under CPFIS eventually.

My Take

The difference between the 2 are almost negligible and it is still early to evaluate which ETF tracks the Index better. Only time will tell but I do not think there will be much differences. For now, I am happily vested in StreetTRACKS STI ETF. I believe likewise for the other investors who are holding StreetTRACKS STI ETFs see no incentive to switch over.