DWS Invest German Equities PFC

Analyst Report
Morningstar's Take

by Barbara Claus
*  This rating and report were issued for a different share class of this fund. The performance and fee structure of this class may vary from that referenced.
Tim Albrecht has decided not to leave DWS at year-end. Following this announcement, we moved the Morningstar Analyst Ratings of DWS Deutschland and DWS Invest German Equities back to Silver from Bronze.

DWS has announced that Albrecht has decided to stay at the firm. This comes after an announcement made in September 2018 that he would be moving to German Private Bank Berenberg in January 2019 to join his former colleague Henning Gebhardt, who had moved to Berenberg in 2017 to set up the firm’s equity capabilities.

Albrecht, who has been with DWS since 2000, will resume his former role as head of the firm’s German, Austria, and Switzerland (DACH) equities platform. He will also continue as lead manager of the firm’s flagship fund for German equities, DWS Deutschland, and its Luxembourg sibling, DWS Invest German Equities. Both funds have built a strong track record under his watch. Hans-Jörg Pack, who was named the lead manager of DWS Aktien Strategie Deutschland after Albrecht’s announced departure, will continue at the helm of that fund.

DWS Deutschland and DWS Invest German Equites used to be rated with a Morningstar Analyst Rating of Silver, while DWS Aktien Strategie Deutschland was Bronze-rated before Albrecht announced his departure in September 2018. At the time his departure was announced, we downgraded DWS Deutschland and DWS Invest German Equities to Bronze and DWS Aktien Strategie Deutschland to Neutral.

As Albrecht will remain responsible for DWS Deutschland and DWS Invest German equities, we have reassigned Morningstar Analyst Ratings of Silver to both funds. This is backed by the experience and longevity of the manager, the dedicated German equity team, a proven process, and a successful long-term track record.

DWS Aktien Strategie Deutschland’s rating remains at Neutral. Hansjörg Pack was named a deputy manager of the fund alongside Albrecht in January 2017. While Pack has been managing several internal mandates for DWS applying a growth-oriented approach, there’s no public track record of him. Given the fund’s unconstrained approach, which leaves the manager plenty of leeway, we are taking a cautious stance until we have seen more of how Pack implements the approach.

Since August 2012, DWS Invest German Equities has been a Luxembourg-domiciled sibling of DWS Deutschland.Following Tim Albrecht’s decision in September 2018 to leave DWS, we decided to downgrade the fund’s Morningstar Analyst Rating to Bronze from Silver. On 21 November 2018, Albrecht announced that he will stay with DWS. He will continue in his role as head of DACH-equities and manager of DWS Deutschland and DWS Invest German Equities, funds he has been successfully running since 2002 and 2012. Albrecht is supported by a team of seven managers for German equities. In 2016, the departure of former CIO Henning Gebhardt, who used to run DWS’ other German equity flagship, DWS Aktien Strategie Deutschland, was a significant loss. Against this background, Albrecht’s change of mind is reassuring. With his presence, the team remains the largest and most experienced in this category. When announcing his decision to stay, Albrecht referred to the recent change in firm leadership, which saw previous CEO Nicolas Moreau replaced by Asoka Wöhrmann. Albrecht’s willingness to remain with DWS to some degree mitigates our concerns around turbulence at the firm level negatively affecting morale and stability within the investment teams. Albrecht’s expertise in bottom-up stock research and top-down analysis underpins the fund's flexible approach. Top-down views are reflected in the portfolio through sector allocation, the allocation to mid- and small caps, thematic investments, and the fund’s equity exposure (90%-120%). Large caps dominate, but mid-caps and small caps can be added with up to 50% of the portfolio (currently 27%). While the strategy's significant asset growth limits its ability to invest in small caps, we do not currently view it as a major impediment to future outperformance. We also welcome the introduction of a more systematic approach to capacity monitoring in 2016.Under Albrecht’s tenure, the fund has consistently outperformed its benchmark CDAX and the category average. Despite above-average risk figures, the fund’s risk-adjusted returns rank in the top percentiles of its category.All said, an experienced manager with an excellent track record reassuming the helm here, combined with ample resources and a tried-and-tested strategy, reaffirm our conviction in this fund. We have therefore reinstalled the fund’s former Morningstar Analyst Rating of Silver.

Morningstar Analyst Rating™
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Portfolio RoleGerman equities can play a supplementary role in a well-balanced portfolio because of the absence of pharmaceuticals and energy stocks in the index.
Morningstar Pillars
Excellent manager and team for German equities, but developments on firm level have to be monitored.
We are not yet convinced that the partial IPO of DWS will substantially improve stewardship, but the listing comes with some benefits.
A well-executed process that gives the manager enough leeway to express his convictions.
The strategy has a strong long-term performance record.
Above-average fees.
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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