25/11/2019 - Funds: DJE - Zins & Dividende
The name says it all
Reliability, i.e. sustainable performance and only moderate fluctuations - this is what the DJE - Zins & Dividende has been offering its investors since its launch at the end of 2010. Its flexible mix of bonds and high-dividend equities aims to generate regular returns, combined with the price opportunities of the securities.
Interest rates? What interest rates? If you lend money to the German state for ten years today, you can no longer expect to get the full amount back. Currently, the yield on 10-year German government bonds is -0.37%. Given the expansive monetary policy of the central banks, rising interest rates are unlikely. The key interest rate of the European Central Bank (ECB) has been 0.0% since March 2016. In addition, to stimulate the economy, the ECB launched an unlimited program in September to buy government bonds worth EUR 20 billion a month and it also lowered the deposit rate, the so-called penalty rate for banks, by 10 basis points to -0.5%.
On a descent since the 80s: yields on 10-year government bonds
Interest rates have been falling since the '80s. In the one-third mix of 10-year government bonds from the USA,
Japan and Germany, a yield of just under half a percent can still be achieved.
Without US bonds, the value would be negative.
The consequences for investors: there will probably be no more significant interest rates on savings for the time being. At the end of 2018, Germany's private households had around EUR 6.2 trillion in financial assets. Of this, only around one trillion is invested in equities and investment funds. By contrast, around 2.5 trillion are invested in deposits and cash, and they no longer pay virtually any interest.1 And inflation is gnawing at it: in September it was 0.80% in the euro zone compared with September 2018 and the core rate (excluding energy and food) was 1.0%.
Whether retirement provision, preservation or accumulation of assets, there is no alternative to investment forms with stronger fluctuations than 10-year German government bonds. These include above all equities, but also interest-bearing securities from regions which still have yields to offer. Interest rates have by no means disappeared everywhere. It is therefore advisable to invest globally in order to take advantage of opportunities wherever possible. Active managed, balanced mixed funds such as the DJE - Zins & Dividende remain a preferred instrument here. Such funds can look for yields where returns can still be found, such as in developing countries, and combine them with steady returns from corporate dividends and stock market price gains.
The DJE - Zins & Dividende combines equities and bonds flexibly depending on the market situation, with the equity component being limited to 50% of the portfolio. This is based on securities selection following comprehensive analysis by our in-house research team. The fund aims to achieve the most positive, low-variation performance possible through steady income from interest and dividends as well as price gains. The success of this strategy can be read in the relatively high current earnings expectations compared with the current interest rate level: approx. 3.4% coupon from the bond component, which currently accounts for around half of the fund’s portfolio, and approx. 2.9% dividend yield from the equity component (approx. 49% of the portfolio).2
The investment focus is on high-quality, high-dividend equities and on the other hand on higher-yield corporate bonds, which tend to have shorter maturities. Fund manager Dr. Jan Ehrhardt says: "For many companies, the next two to three years can be roughly forecasted and their cash flow can be predicted. That's why we don't enter into excessively long maturities here, only about three years on average. According to our analysis, we can be relatively sure that the company will survive these three years, regardless of what happens in the global economy." Ehrhardt is also looking for high-quality US bonds, which currently yield around 1.5% over two years, and Chinese government bonds with a high credit rating and a yield of between three and just under four percent. High dividend yielding equities, on the other hand, are less common in the US than in Europe and Asia, where dividends account for a higher proportion of overall equity performance. The DAX groups, for example, achieved profits of around 80 billion euros in 2018, despite poor stock market results worldwide, and distributed around 35 billion euros of this to their investors.3
The DJE - Zins & Dividende, which was awarded the German Fund Prize in 2018 and 2019, remains true to its name and investment strategy: it opens up the earnings potential of bonds and equities to its investors - with only moderate fluctuations. However, the fund is subject to the usual market, credit and liquidity risks. In the case of bonds, there are also price risks in the event of rising interest rates. And with its focus on dividends, the fund can only benefit to a limited extent from companies that do not pay dividends.
Note: All information published is for your information only and does not constitute investment advice or other recommendation. Long-term experience and awards do not guarantee investment success. Securities are subject to market-related price fluctuations which may not be compensated for by the active management of the asset manager or investment advisor. This information cannot replace a consultation. All information has been provided with care and to the best of our knowledge at the time of preparation. Despite all due care, the data may have changed in the meantime. Further information on opportunities and risks can be found on the website www.dje.de. The sales prospectus and further information are available free of charge in German from DJE Investment S.A. or at www.dje.de The fund management company is DJE Investment S.A. DJE Kapital AG is the distribution agent.