Low-risk returns: Foundation funds: which funds have proven themselves – uro am Sonntag’s recommendations | message
Fund in this article
by Thomas Strohm, Euro am Sonntag
D.he goal of foundations when it comes to investing is clear. On the one hand, achieve the highest possible income in order to be able to finance many projects in line with the foundation’s purpose. On the other hand, do not expose the capital to too great a risk in order to preserve the assets.
This is precisely the great challenge for the fund managers to whom the foundations entrust their money. Because in the low interest rate phase, which has persisted for years, low-risk bonds can hardly generate any income. And this year there are also the sometimes extreme price fluctuations as a result of the corona pandemic, which affected many asset classes, but were particularly painful to feel on the stock markets.
The Munich-based analysis company FondsConsult has now examined foundation funds for the seventh time. The cut-off date for the data on which the study is based was April 30. Thus, March with the corona crash falls into the study period, as does the beginning recovery on the stock exchanges in April.
The clear winner this year is the FvS Foundation. The fund of the Klner property manager Flossbach von Storch was the only one of the 20 examined products to be rated “very good”. After all, six funds received “good +”, two “good” and six “good-“. Four funds have to be content with the grade “satisfactory +”, one fund only received the rating “satisfactory”. Details of the evaluation can be found in the table on the right.
There is no generally binding definition for the term endowment fund, so there are no guidelines for the investment style of the portfolio manager. The funds examined in the study are predominantly defensive mixed funds with a maximum of 30 percent shares and at least annual dividends. Their providers are primarily vying for foundations as customers, which is evident in the name of a number of products. Because these are mutual funds, private investors who are looking for a low-risk investment can also invest in the products. As a rule, there are no higher minimum investment sums than entry-level funds with foundation funds.
The study took into account funds that have been on the market for at least three years and have a volume of more than 50 million euros. The analysts examined qualitative criteria such as fund management, investment principles, costs and distributions. They also looked at quantitative criteria such as return, risk taken, volatility of share prices and maximum loss. An overall rating was calculated for each fund from these two aspects.
“The market environment of the past twelve months, and of course primarily the Corona crisis in 2020, presented many funds with major challenges,” write the experts from FondsConsult. This has less affected the equity side, which plays a subordinate role in most foundation funds because of the approach. Rather, the problem was the widening of the risk premiums on the bond side, since the proportion of corporate and emerging market bonds in the majority of the funds had increased noticeably in order to be able to generate an acceptable return.
Untapped opportunities in stocks
According to the analysts, the overarching problem remains that strategies are generally analyzed by all market participants in much too short periods of time and, for example, the long-term yield advantage of stocks due to their increased short-term volatility can only come into its own to a very limited extent. “The long-term investment goals are almost inevitably missed, especially in an increasingly challenging bond market environment,” write the study authors. This is all the more regrettable as foundations should have a long-term investment horizon.
Image sources: Valery Egorov / stock.adobe.com, Ismagilov / Shutterstock.com, Finanz Verlag