Fee Increases at Both Dollar ETFs

Includes: UDN, UUP
by: Don Dion

A planned fee increase went into effect on January 4th for both the PowerShares DB US Dollar Index Bullish Fund (NYSEARCA:UUP) and the PowerShares DB US Dollar Index Bearish Fund (NYSEARCA:UDN).

UUP seeks to track the performance of the US Dollar against a basket of major currencies, while UDN tracks the inverse of that performance.

The fee increase was something that PowerShares had noted on the fact sheet of the funds as far back as September 30th, but may come as a surprise to investors not used to reading fine print. It stands as an excellent reminder of how ETF investors should carefully read the prospectuses and background information for fund purchases they make.

In giving a reason behind the fee increase, PowerShares stated that they needed higher management fees due to changing regulatory requirements. Judging from the decreasing assets under management at UUP this week, it appears as though the fee increase has also reduced the amount of hot money in UUP.

Although the fee change may dishearten investors in UUP, there was some positive news in that starting January 5th UUP began issuing new shares again. It had not been able to do so since December 18th and since then the fund was trading like a closed-end fund. Investors in UUP now do not have to worry about the fund potentially running up a premium, although the fee increase to some investors may appear as just as much of a deterrent.

Disclosure: Hold a position in UDN