Rolle im Portfolio
The Deka Dt. Boerse EUROGOV Germany 1-3 UCITS ETF provides investors with exposure to the 1-3y maturity spectrum of the German government bond market.
This fund’s singular focus on German government debt, the undisputed Eurozone sovereign safe-haven market, allows for effective tactical deployment, particularly in times of uncertainty. Investors may use this fund to reduce the risk of existing fixed income holdings issued by less credit worthy issuers. It should be noted that, in the current low yield environment, these risk-reduction benefits are likely to be accompanied by meagre returns.
This fund may also be utilised as a vehicle for capital preservation. Due to the unlikelihood of a German default and short-dated bias this fund may be suitable for those wishing to minimise investment risk. However, those seeking higher returns may look further out on the maturity spectrum. This, while posing additional risks, may suit those who feel Germany a high enough rated issuing authority to consider the risk worth taking.
Tactically-minded investors can use the ETF to manage interest rate risk exposure within a broader portfolio of fixed income holdings spanning the entire curve. The ETF's short maturity bias allows investors to roll out a duration shortening strategy at times of rising interest rates.
Fundamentale Analyse
The German government remains the chief architect of economic policy in the Eurozone. Severe budget deficit reduction strategies have been imposed at the behest of Germany on her Eurozone partners in exchange for Berlin’s support for some unpalatable compromises (e.g. sovereign bailouts and the setting up of the European Stability Mechanism). The net effect of this policy drive so far has been that of widening a growth gap between core and peripheral Eurozone economies to the benefit of the former but also forcing the latter to undertake much needed structural reforms. The export-oriented German economy posted an impressive recovery from the depths of the post-Lehman recession, and although the pace of GDP growth slowed in recent years, the basic premise of German outperformance remains solid.
The health of the German economy is good. However, as a whole, Eurozone’s growth, though up from the lows, remains below potential. Prompted by deflationary pressures – heightened since the collapse of oil prices - and anaemic growth levels experienced by the Eurozone, the ECB announced a massive quantitative easing programme in January 2015. The programme involves the buying of 60bn Euros of government bonds on a monthly basis until, at the earliest, September 2016. Full blown QE represents the latest, and most dramatic in a series of economic stimulus measures introduced by the ECB, including earlier asset buying initiatives (e.g. covered bonds) and successive interest rate cuts which have left lending rates hugging the zero bound.
Although such an enormous and sustained stimulus package is expected to boost price levels – at least in the near-term - there remain question marks over the structural stability of the Eurozone.
The potential for significant political tensions within the monetary union has resurfaced with the election of Syriza in Greece, who swept to power on an anti-austerity, debt-forgiveness ticket. The rise of similarly populist political forces in other Eurozone countries is also a cause for concern.
The ECB’s monetary activism seems to have significantly reduced the risk of contagion. However, even accounting for this, the management of the Greek situation has the potential to alter core-periphery dynamics.
Should the Eurozone core-periphery relationship strain considerably, this ETF is likely to prove to be an attractive ‘safe-haven’ investment for Eurozone fixed income investors given Germany’s dominant role within the EMU.
Alternatively, in the event that QE does provide stability and boost price levels, due to its mandate, the ECB will be obliged to raise rate in response. If administered indelicately, this could prompt a stampede of investors exiting their fixed-income positions. Under these circumstances, this ETF would be vulnerable – although not as vulnerable as funds with a longer duration - to the associated fall in bond prices. However, at present this scenario remains a very distant prospect.
Indexkonstruktion
The Deutsche Börse EUROGOV Germany 1-3 index is produced and disseminated by Deutsche Börse and aims to track the performance of the 1-3y maturity segment of the Germany sovereign debt market. Interest payments are reinvested into the index as soon as they are paid. In general, highly liquid bonds with a higher nominal value and shorter time to maturity are preferred. Index constituents must be fixed rate bonds with a minimum outstanding of EUR 4bn. For those German sovereign bonds meeting this criteria, the index chooses the 15 most liquid and will not hold more than 15 constituents. Index constituents are weighted according to their total amount outstanding. The index employs a cap to limit the size of any one constituent to 30% of the overall index value. The index rebalances quarterly.
Fondskonstruktion
Deka fully replicates the performance of the Dt Boerse EUROGOV Germany 1-3 total return index by holding all the index constituents at the same weight as stipulated by the index. At the time of writing, the debt maturity distribution across the fund’s holdings is 1-3y (~100%). The fund distributes dividends on a quarterly basis. According to our research Deka does not currently engage in securities lending for this fund.
Gebühren
Deka charges a total expense ratio (TER) of 0.15% for this ETF, which falls in line with other funds in this category. The fund has lagged its benchmark by approximately the value of its TER annually, which indicates tight tracking. It should be remembered that there are additional, investor-specific costs associated with trading the ETF, such as bid/offer spreads and brokerage commissions, which should be factored into an investment decision. There are also rebalancing costs whenever the index changes composition.
Alternativen
The iShares eb.rexx Government Germany 1.5-2.5yr UCITS ETF is currently the most popular ETF, as measured by AUM, in the European market offering exposure to the short-term German government bond market. The iShares fund physically tracks the eb.rexx® Government Germany 1.5-2.5 Index and charges a TER of 0.16%.
Also more popular in in terms of AUM is the db X-trackers iBoxx Germany 1-3 UCITS ETF, which tracks the Markit IBOXX EUR Germany 1-3 Index, is domiciled in Luxembourg and also charges a TER of 0.15%.
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