Against the ETF trend: a plea for active investing

D.he trend towards passive investment products continues unabated. Is it still worth investing in individual stocks? Yes, says Daniel Hupfer, Head of Portfolio Management at M.M.Warburg & Co. “You can’t defend yourself against market mechanics. But you can draw conclusions from it and use it for yourself. ”You first have to observe how the passive investment works. Then look at how the money is flowing and what is going on in the stock market. And finally, you use it actively to your advantage.

“A single title approach is less broad,” says Hupfer. “So if, as in recent times, sustainable investments are in great demand, we are not replicating the index. Instead, we look at the indices and build the most attractive stocks into our portfolios. ”That makes direct investments more interesting in most markets and where you don’t have your own analytical capacities but want to invest, you can still use passive products. So far, it has worked well in the Corona crisis.

“There was a lot of need for discussion. But the good thing about taking a single-stock approach is that it’s easy to explain investment decisions. That is a psychological advantage, because it makes it easier to get through a crisis emotionally. ”Of course, that applies above all to individual asset management. This is more difficult with the unit-linked management of smaller assets. “Market-related investments and ETFs are thrown overboard relatively quickly in such times. Basically the same arguments apply as for stock picking, but ETFs are less emotional and less tangible. “

Bonds in small pieces

In other respects, too, a single-stock approach has been easier in recent months because it makes it easier to position it with crisis winners. The big trend, however, are sustainable investments in the large ESG topic, i.e. environmentally friendly, socially responsible investment based on the principles of good corporate governance. “We are looking for stocks that are of great importance in terms of sustainability,” says Hupfer, but urges a sense of proportion. “Financial data is then looked at less intensively. Fund investments are booming and caution should be exercised here, because this is also being exploited. “

Hupfer admits that it is not that easy with the single-security approach for bonds. “The large denominations are a problem if you do not want to take a single security risk on the bond side.” Warburg therefore takes advantage of the fact that the denomination applies to trading, but not to ownership, and distributes the purchased bonds proportionally to the corresponding securities accounts. “It still works comparatively easily with purchases, but you have to collect sales, which is tedious and time-consuming. But it’s worth it. With new issues, for example, we achieve quite decent subscription profits. “

The consulting business is more problematic. The trend towards ETFs and funds, which in turn contain more and more derivative components, makes high demands. “But the bond market is more than ever an institutional market. Basically, private investors only have the ETF if they want to reduce volatility with bonds, because they hardly bring current returns. “

Asset management has an advantage, because they can still take advantage of opportunities such as the acquisition of bonds without a rating or euro bonds from Indonesia or Mexico, where the interest rates are still comparatively adequate. “A single title approach also saves running costs, is much more flexible and the risk can be determined,” says Hupfer, listing the advantages. Customers have to bring sufficient assets with them, ideally in the six-figure range, and also time. “Those who invest at short notice are better off using the ETF,” says Hupfer.


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