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DWS Invest German Equities LD

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.

Since August 2012, DWS Invest German Equities has been a Luxembourg-domiciled sibling of DWS Deutschland. Our conviction is based on the fund’s experienced manager, who can draw on ample resources and a tried-and-tested strategy. We confirm the fund’s Morningstar Analyst Rating of Silver.Tim Albrecht, head of DACH-equities, has successfully run the strategy since 2002 in DWS Deutschland. In September 2018 he announced his departure from DWS, a decision he took back three months later. In the interim, the fund was run by deputy manager Christoph Ohme and the fund’s rating was downgraded to Bronze until Albrecht reassumed the helm in January 2019.In 2016, the departure of former CIO Henning Gebhardt, who ran the firm’s 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 Morningstar Category. When announcing his decision to stay, Albrecht referred to the change in firm leadership, which saw previous CEO Nicolas Moreau replaced by Asoka Wöhrmann. His willingness to stay at DWS somewhat mitigates our concerns around turbulence at the firm level negatively affecting morale and stability within the investment teams. He is supported by a team of eight managers for German equities. His 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%-130%). Large-caps dominate, but mid-caps and small-caps can be added with up to 50% of the portfolio (currently 23%). While the fund’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 outperformed its benchmark CDAX and the category average in most years. 2018 was an exception, when performance suffered from the high equity exposure of more than 120% in falling markets and poor stock selection. Over the long term, despite above-average risk, the fund’s risk-adjusted returns still rank in the top percentiles of its category.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleGerman equities can play a supplementary role in a well-balanced portfolio given 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 fund 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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