Deutsche Bank Wealth Management launches new strategic asset allocation ETF-based funds

Maria Nikolova

The launch is in response to demand from clients for simple, cost-effective, long-term investment portfolios designed to address the challenges of unstable market cycles.

Deutsche Bank Wealth Management is launching a new series of strategic asset allocation (SAA) ETF-based funds in Europe this week. The launch is in response to demand from clients for simple, cost-effective, long-term investment portfolios designed to address the challenges of unstable market cycles.

Whereas discretionary investments usually focus on tactical positioning to meet or exceed market benchmarks with a medium-term horizon, the new funds enable clients to access and invest in the long-term view of the WM Chief Investment Officer’s (CIO) team, including structural economic shifts lasting a decade or more. In addition, clients have the option to invest in funds using Deutsche Bank’s systematic hedging strategies, known as Risk-Return Engineering, aiming to add downside protection.

The funds are particularly cost-efficient because they invest in low-fee ETFs using open architecture and are built to minimise the need for frequent rebalancing. They are wrapped in-house by Deutsche Bank’s DWS arm, one of the world’s largest asset managers.

“The timing for our Strategic Asset Allocation funds could not be more appropriate,” said Claudio de Sanctis, Global Head of Deutsche Bank Wealth Management.

“Wealth management clients are looking for robust and efficient ways to protect themselves and their families from the kind of volatility we have seen recently because of the coronavirus. We have a particular vantage point as the leading bank in Europe’s biggest economy to anticipate what might come next and help our clients prepare,” he explained.

The majority of long-term portfolio returns are attributable to strategic asset allocation, making it key to managing multi-asset portfolios.

The classical approach to strategic asset allocation relies on forecasting the returns and volatility expected from each asset class, and how the price of each asset class is expected to move in relation to the others. A calculation is then made about which combinations of asset classes have the highest potential for a given level of risk. However, the parameters may not behave as forecasted. The approach by Deutsche Bank Wealth Management is to go one step further by factoring in the level of uncertainty that can be applied to each parameter of each forecast, and therefore build portfolios that are more robust.

“Effective SAA does not claim to have perfect knowledge of future asset class returns,” said Christian Nolting, Global Chief Investment Officer for Deutsche Bank Wealth Management. “However, we do it not only via analysis of risk and return, but also through an in-depth understanding of correlations between asset classes.”

Subscriptions for the SAA funds open this week in Germany, Luxembourg and Switzerland and the first net asset value (NAV) will be calculated on April 30. They will also be rolled out in other European countries as well as in Asia later this quarter.

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