Analyse: ComStage ETF DAX

Wie lange hält sich die deutsche Wirtschaft noch in einem schwachen europäischen Umfeld? Mit diesem ETF setzen Anleger allerdings nicht nur auf das Wachstum auf dem alten Kontinent.

Gordon Rose 25.04.2013

Rolle im Portfolio

ComStage ETF DAX TR provides exposure to German large-capitalisation equities, and can be used as a core holding for investors looking to build a German-centric portfolio. Despite the fact that all index constituents are multinational companies generating revenue around the world, the DAX is often used as benchmark for the German market. For instance, the largest index constituent, Bayer, generated only about 10% of its sales in Germany in 2012. Many other companies also generate far less than 50% of their revenue within Germany. As such, this investment can also be seen as a passive play on the pan-European and/or global economy with a German bias.Over the past three years, the DAX has shown a 86% correlation to the widely-held EURO STOXX 50 and an 78% correlation to the MSCI World. This in part reflects the fact that some of the largest constituents of the German index, such as Siemens and BASF, are truly global players that compete worldwide in sectors like industrial materials, financial services and automobile manufacturing.

ComStage ETF DAX TR can also act as a tactical tool to overweight German equities within a diversified portfolio. However, it is important for investors to examine the index’s constituents. Like many single country indices, the DAX is fairly top heavy, with the top 10 constituents accounting for almost 70% of its value. The largest holding is Bayer, which accounts for about 10% of the portfolio. The financial sector, consisting mainly of Allianz, Deutsche Bank and Munich Re accounts for about 17% of the index.

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Fundamentale Analyse

The short- to mid-term economic outlook for heavily export-oriented Germany has deteriorated. Stubbornly high unemployment and falling manufacturing activity threatening the recovery of the Eurozone, and the slowdown in Emerging Market economies – in particular China – in the first quarter of 2013 have taken its toll on the once resilient largest economy in Europe.

Economic data have been somewhat mixed. Industrial output in the Eurozone rose by 0.4% in February, although it rose by 0.9% in Germany. However, a sharp downward revision of Germany’s January data muted the Eurozone picture, hinting to a slower than expected recovery. Also, unemployment in the Eurozone remains at its highest level since the euro’s creation, reaching 12% in February. Meanwhile unemployment in Germany remains at a low 5.4%. Some data indicate that the Eurozone contracted again in the first quarter of the year. The PMI for the Eurozone dropped further into contraction territory at 46.5 in March, while Germany’s PMI (50.6) remained just above the 50 threshold separating contraction from expansion. As a result of rather weak economic data, the German government’s economic advisor cut the GDP growth forecast for 2013 from 0.8% to 0.3%.

Further sentiment data has added to concerns on the overall health of the German economy. In April, the ZEW index dropped for the first time in five months from 46.5 to 36.3; well below market expectations for a milder fall to 43.0. According to ZEW, the sharp decline in sentiment was consistent with the release of economic data also falling short of expectations

Additional factors likely weighing on sentiment include a weaker Japanese yen impacting the external competitiveness of Germany’s high-end manufacturers, and a slowing Chinese economy.

Germany’s Bundesbank also contributed to the generally gloomy outlook by cutting its GDP growth forecast, partly on the negative effects of the still recessionary state of the Eurozone’s peripheral countries. By contrast, despite the weak data, the IMF has raised its 2013 GDP growth forecast slightly to 0.6% from a previous 0.5%.

Looking forward and taking into consideration the export-oriented nature of its economy, Germany could benefit from any improvement in the outlook of the US and Asian economies, despite a recent slowdown in China.

Companies in the basic materials sector, the largest sector in the DAX, generally operate in a highly cyclical environment and are subject to fluctuating commodity prices. Rising raw material costs can put pressure on these firms’ margins and dampen demand. However, any deterioration of the Eurozone sovereign debt crisis should put downside pressure on the euro, in turn providing support to exports.

Consumer goods companies, representing the second largest sector in the DAX, are more dependent on the strength of German domestic demand. Low unemployment (5.4% in February) and low inflation (1.8% vs. 1.7% in the Eurozone) should serve to support consumer confidence. In fact, Germany’s volume of retail trade ticked up slightly in February by 0.4% m/m.


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The DAX index comprises the 30 largest companies trading on the Frankfurt Stock Exchange and represents approximately 80 % of the free-float adjusted market capitalisation of the Prime Standard Segment. The value of the DAX is based on free-float market capitalization and trading volumes. The weighting of an individual constituent is limited to 10% of the index’s value. The index weightings are reviewed quarterly and the index’s composition is reviewed once a year in September. The DAX is one of the few major country indices that is calculated on a total return basis, i.e. dividends are constantly reinvested into the index. Basic materials is the primary sector represented, with 25% of the index's value, followed by consumer goods (19%), financials (17%), and industrials (14%). Bayer is the largest component of the DAX with a 10% weighting. Rounding out the top three constituents are Siemens and BASF.

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ComStage ETF DAX TR uses synthetic replication to track the performance of the DAX total return index. The fund holds a basket of securities, whose performance is given away to the swap counterparty Commerzbank in exchange for the performance of the DAX. The basket of securities consists of European equities (usually Euro Stoxx 50 or DAX companies) and is reviewed and marked to market daily. Swaps are reset three to four times per year and when¬ever there is a creation/redemption. Instead of resetting the swap when it has a positive marked-to-market value, ComStage requests the swap counterparty to post collateral in between resets. This serves to mitigate counterparty exposure. Collateral is adjusted on a daily basis to ensure that 105% collateralisa¬tion of the swap exposure is maintained at all time.. The swap collateral consists of German, UK and/or French government bonds. Currently only German government bonds are used. Up to 100% of the securities held by the fund can be lent to Commerzbank for a fee which will be fully passed back to the fund. While this securities lending activity can help improve the fund’s return, it can also introduce additional counter¬party risk at the fund level, To protect the fund in the instance of Commerzbank defaulting, borrowed positions are fully collateralised with German bonds. The fund’s substitute basket is held in a segregated account at the custodian BNP Paribas Securities Services and moni¬tored daily by ComStage’s management company, Commerz Funds Solutions SA (a Commerzbank’s subsid¬iary), as well as the custodian. Collateral is held by Commerzbank in a segregated pledged account at Clearstream Banking, Luxembourg.

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ComStage ETF DAX TR was launched in July 2010 with a very competitive TER of 0.12%, the lowest expense ratio amongst ETFs tracking the DAX. Other potential costs associated with holding this fund which are not included in the TER include swap costs, bid-ask spreads and brokerage fees.

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The DAX is one of the most successful benchmarks tracked by ETFs in Europe, so there is no scarcity of alternatives for investors. Providers including Lyxor, db x-trackers, iShares, Source and ETFLab offer DAX ETFs, although at higher total expense ratios (ranging from 0.15% to 0.17%). Among all these funds, first mover iShares DAX (DE) remains the most popular with EUR 13.1 billion of assets under management as of this writing and a TER of 0.16%. It is also the most heavily-traded on the Frankfurt Stock Exchange as measured by the 3-month average daily trading volume, a key (but by no means comprehensive) measure of liquidity.

Alternatively, income-seeking investors could take a look at ETFLab DAX Inc, which distribute dividends to fund holders. The funds’ expense ratio is 0.15%.

Über den Autor

Gordon Rose  ist ETF-Analyst bei Morningstar.