Update: ComStage DAX® TR UCITS ETF

Deutschland ist Exportweltmeister, und das spiegelt sich im DAX wider. Anleger sollten zum einen die zyklische Natur des deutschen Leitindex beachten -- und die hohe Konzentration auf Einzeltitelebene.

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Rolle im Portfolio

The ComStage DAX TR UCITS ETF is designed for investors who seek exposure to the large-capitalisation segment of the German stock market. It could be used as core holding for German-based investors or as a tactical tool to manage single-country exposure in a globally diversified portfolio.

The portfolio of companies covers 80-85% of the German total market capitalisation and consists of 30 blue chip companies, well diversified across several sectors. All constituents share one common characteristic – they are export-oriented and therefore not highly dependable on Germany or even Europe for revenue generation. Given its global revenue exposure the DAX Index displays high correlations with MSCI World (75-80%) and MSCI Europe (85-90%). As such, the diversification benefits of this ETF within a geographically broad-based equity portfolio are limited. However, by the same token, this ETF could be used as proxy for those markets.

Investors who want to increase their exposure to the German economy can achieve this through mid-capitalisation equity ETFs, where, comparatively, the companies in the portfolio would be more reliant on the domestic market.

Investors should be aware that all dividends paid to this ETF are reinvested into the fund; therefore it may not be suitable for income-seeking investors.

Fundamentale Analyse

The DAX Index is not necessarily the best proxy for the German economy given the multinational revenue exposure of its underlying companies. The chemical and automobile sectors make up 40-50% of the DAX. Though classed as highly cyclical industries, they are recognized globally due to the high competitiveness and innovation. Some of the highest-weighted constituents, such as Daimler and Bayer derive the bulk of their revenue from the United States or the emerging economies, and so company profitability is less sensitive to developments at home.

Having said that a key driver of performance for the DAX has been the rolling out of Quantitative Easing by the ECB in early 2015.Through the purchasing government bonds, plus additional measures (e.g. zero-bound interest rates), the ECB aims to revive the Eurozone’s economy while boosting inflation. The ECB’s policy has also weakened the EUR against other major currencies, thus improving the competitiveness of the Eurozone-based export oriented companies. Considering the critical contribution the exports of goods and services make to its GDP – estimated at 45-50% – Germany is bound to be one of the main beneficiaries. Besides, the improved outlook for the Eurozone may help allay any concerns about the slowdown of emerging markets on German exporters.

Another positive driver of German corporate profits is the sharp decline of commodity prices in mid-2014. According to the EU Commission more than 50% of the German economy depends on liquid fuels such as crude oil and natural gas. Liquid fuel prices – as measured by the S&P GSCI Crude Oil and Natural Gas Indices – have declined by 40-50% from November through April. This should be expected to have a positive impact. However investors should be aware that energy prices are highly volatile and can quickly regain the lost ground, which is one of the main risks when investing in cyclically-oriented portfolio of companies.

After a stellar recovery from the 2008 crisis, Germany has experienced a modest above-zero GDP growth since 2012. But overall, the weakening EUR coupled with subdued energy prices and easier financial conditions across the Eurozone could set the scene for growth acceleration.


The index objective is to track the total return performance of the 30 largest and most liquid German companies listed on the Frankfurt Stock Exchange. Altogether they represent 85% of the aggregated Prime Standard segment capitalisation. Individual stocks are weighted on a free-float market capitalisation basis with capping of 10% to avoid single-name concentration. Chemicals and automobiles are the biggest sectors – 20-25% weighting each, followed by insurance (10-12%), industrials (8-10%) and software (5-7.5%). Despite a relatively high concentration in the top two sectors, the index overall exposure is well diversified, given the almost even allocations of the remaining sectors and the 10% cap on individual stocks. Amongst the companies with higher weightings are the chemical giants Bayer and BASF (8-10%) and the automobile conglomerate Daimler (8-10%). The index weightings are reviewed quarterly. The index had an average annual gross dividend yield of 3.6% in the five years ending in March 2015 and all dividends are reinvested using a withholding tax rate of 0%.


The ETF uses synthetic replication to track the performance of the DAX on a total return basis. The fund holds a basket of securities, whose performance is given away to the swap counterparty Commerzbank in exchange for the performance of the DAX. The basket of securities consists of European equities (usually Euro Stoxx 50 or DAX companies) and is reviewed and marked to market daily. The fund’s substitute basket is held in a segregated account at the custodian BNP Paribas Securities Services and monitored daily by ComStage’s management company Commerz Funds Solutions SA (a Commerzbank’s subsidiary), as well as the custodian. Swaps are reset three to four times per year and whenever there is creation/redemption. Instead of resetting the swap when it has a positive marked-to-market value, ComStage requests the swap counterparty to post collateral in between resets. This serves to mitigate counterparty exposure. Collateral is adjusted on a daily basis to ensure that 105% collateralisation of the swap exposure is maintained at all time. The swap collateral consists of German, UK and/or French government bonds. Currently only German government bonds are used. Up to 100% of the securities held by the fund can be lent to Commerzbank for a fee which will be fully passed back to the fund. While this security lending activity can help improve the fund’s return, it can also introduce additional counterparty risk at fund level. To protect the fund in the instance of Commerzbank defaulting, borrowed positions are fully collateralized with German bonds. Collateral is held by Commerzbank in a segregated account at Clearstream Banking, Luxembourg.


With a total expense ratio of 0.08%, the ComStage ETF is the cheapest DAX tracker currently trading. Investors should also consider additional costs such as rebalancing fees, bid-ask spreads and brokerage fees. In the year to end April 2015, the fund underperformed its benchmark by 0.20%.


Currently there are plenty of additional ETFs tracking the DAX – iShares, db x-trackers, Deka and Lyxor. They all use full replication. In fact, ComStage itself offers a dividend-distributing physically-replicated DAX ETF. A difference is in the funds’ domicile. Both iShares and Deka ETFs are domiciled in Germany, whereas db x-trackers, Lyxor and ComStage Luxembourg-domiciled.

The total expense ratio levied for the above ETFs ranges between 0.09-0.16%. Cheapest is db x-trackers (0.09%), whereas iShares, Lyxor, Deka and the physical ComStage– are comparatively more expensive, all levying 0.15-0.16%.

Investors seeking broader exposure to the German equity market can consider the Amundi MSCI Germany ETF, which also provides access to its mid-capitalisation segment. The fund uses synthetic replication and charges 0.25% per annum.

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Über den Autor

Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure