Smarter than a DAX ETF

Review: The concept when the fund was launched

The concept behind the fund launched by the sentiment specialists at sentix in 2013 aimed to combine the advantages of both worlds. On one hand, it aimed to offer the cost-effectiveness and predictability of an ETF (Exchange Traded Fund). On the other hand, through targeted active management of the fund's beta (investment ratio), it aimed to achieve a higher return compared to ETFs and the DAX, even after accounting for costs.

Another key aspect of the fund was its emphasis on predictability right from the beginning. Patrick Hussy, Managing Director of sentix and portfolio manager of the fund, explains that by focusing solely on controlling the equity investment ratio, the fund was designed to avoid unpleasant surprises associated with risky components. This innovative approach was recognized by the FERI EuroRating Awards committee, who awarded the fund concept the prestigious title of "Fund Innovation 2014," affirming the strength of the idea behind it.

A decade later: Exceptional ratings from rating agencies

Since its launch, the sentix Aktien Deutschland fund has delivered impressive results, outperforming typical DAX ETFs and the DAX itself. Over the ten-year period from 15 March 2023 to 14 March 2023, the fund has generated an additional return of around ten percent after costs when compared to DAX ETFs. Moreover, the fund has achieved a performance of 93.7 percent, surpassing the DAX's 91.0 percent return after costs during the same period.

Crucially, these positive results have not been achieved by systematically increasing risk. With an average correlation of 0.99 and an average equity investment ratio of 100 percent, the fund's risk indicators, such as drawdown and volatility, are comparable to those of the DAX. This additional return, referred to as "real alpha", can be attributed to the effective utilisation of sentix's highly respected sentiment data by the fund management team.

The outstanding performance of the fund over such an extended period has consistently garnered top ratings from renowned rating agencies. Morningstar awards it five stars as of 28 February 2023, while Scope assigns it an "A" rating as of the same date. Lipper Leaders recognises its highest rating for both the Total Return and Consistent Return funds for March 2023. Additionally, Citywire has nominated sentix as the best fund company in the "Equities D" category for 2022 and 2023.

"We paid careful attention to the cost structure when launching the fund, and coupled with strong investment choices, we have created a top-quality product," explains Manfred Hübner, founder of sentix, summarising the fee philosophy of sentix Fonds Aktien Deutschland.

German companies and the DAX: A better performance than their reputation suggests

Can the sentix Fonds Aktien Deutschland sustain its successful track record in the next decade? This question largely hinges on whether we wish to include the DAX as an underlying asset our portfolio. Given the current geopolitical and economic challenges faced by Germany, this becomes a typically German consideration. Germany, as the fifth-largest economy, boasts nearly 1,500 global market leaders, irrespective of the prevailing government configuration.

The DAX index holds significant global importance, serving as a benchmark for over 150,000 underlying instruments. It covers approximately 80 percent of the market capitalisation of German shares. The recent expansion of the index from 30 to 40 stocks has further enhanced its diversification and growth potential.

The DAX stands out as one of the few performance-based stock market indices, ensuring long-term growth prospects. Dividends, which have increased fivefold since 2004, are consistently reinvested, contributing to this growth. Over a ten-year investment horizon, the DAX has delivered positive returns in nine out of ten cases (from 28, February 2003 to 28 February 2023).

When viewed internationally, the DAX remains competitive. Calculated over a 20-year period (from 28 February 2003 to 28 February 2023), the total returns, comprising price gains and dividends, for the DAX stand at 9.4 percent annually, only slightly below the S&P 500's 10.2 percent. In comparison, the Nikkei, EuroStoxx 50, and MSCI World (euro hedged) indices trail the DAX by 1.5 to 2 percent during this timeframe.

^{*Feri EuroRating Awards 2014, special category "Fund Innovation”}