Mutual funds will recover

We're making a V How foundation funds recover after the corona crash

The corona crash was something like the Litmus test also for foundation funds. The fund concepts had to show what they could do, they had to prove themselves in what was probably the fastest crash of all time. They did that too, but the downward movement is always only one truth, the other comes into play when the markets shake off the crash pangs and move up again. This has been the case since the end of March. It is not only important to look good in the crash, but also to be “with the music” afterwards. Funds can only do this if the allocation is fundamentally set up accordingly or if the fund management was active in a crash and then also acted countercyclically. That is the art, and ultimately a foundation wants to see that its fund manages to come out of such a market distortion. Arming oneself against the crash itself would have meant being able to see it in advance, and only a few manage to do that, but after the crash it is a quality that should not be underestimated.

Conservative can be crisis

The Commerzbank Stiftungsfonds (ISIN: DE000A1XADA2) has this quality, although the V here is one with Henkel. At first there was a steep upward trend in the recovery, then sideways with a slight upward trend. The overriding look at the chart shows that the fund has these taker qualities, because 50 percent of the Corona dent has already been made up. Looking at the annual perspective even shows that the discount is only a little more than two percent, and that is really more than bearable for foundations as well. This small discount also proves that an endowment fund with a conservative profile can deliver when it matters, or maybe just then. In any case, the allocation works with its current 78 percent bonds and 18 percent stocks, with a clear focus on Europe and investments overseas in only very manageable doses. Perhaps some opportunities will be left on the table in the medium term, but on the other hand, such fund modules are also needed, since foundations operate in the portfolio context and then combine different styles and approaches with one another.

A contemporary allocation

For the DZPB II Foundation (ISIN: LU1138506479) it is again evident that the V is a rather flat one and the beautiful development was abruptly interrupted by the Corona crash until March 2020. The fund lost more than 10% in the downward thrust, and the drawdown has now been reduced to five percent. The fund was recently able to further reduce the dent, so it is increasing in small steps. The allocation certainly contributes to this, and it is still or now even more proving to be up-to-date. Because with just under 50 percent pensions and in the other half a mix of stocks, cash and convertible bonds, there is scope for the phase in which it is again possible to assess with more certainty where the economy and then also the stock markets are going in the medium term. The cash holdings in particular give hope that the portfolio can then be accentuated again. This means, in turn, that the slightly flatter V could indicate that the foot was deliberately taken off the gas in order to have maneuvering space for what is coming and of which no one can say exactly what is coming.

The one with the international touch

In turn, the Spiekermann Foundation Fund (ISIN: DE000A1C1QH0) developed a nice V. The fund “can” catch up, as the weeks after the corona crash showed. The V was initially very steep, so the upswing was just as fast as the decline in the fund's unit price, and the recovery continued recently, but at a somewhat slower pace. Here, too, more than 13 percent cash can be seen in the allocation of the investments, so the allocation can still be fueled. What is noticeable about Spiekermann Stiftungsfonds is the following for an endowment fund: The allocation in the fund is overall much more international. This is pleasing insofar as diversification also means playing ideas internationally and also diversifying into countries outside of Europe. In addition, the corona crash showed that individual countries and industries were building up relative strength again relatively quickly, which is exactly what the fund makes use of. This is what sets the Spiekermann product apart from most endowment funds and should also play its part in the distribution of the future cake of returns.

The all-weather classic

Finally, for the Hamburg foundation fund (ISIN: DE000A0YCK42), a hanging V was found, which first pointed upwards and was significantly flatter. But such a V does not reveal the whole truth about a fund either. If you broaden the focus, and that is what foundations should always do, regardless of their long-term horizon, then it turns out that the Hamburg foundation fund is under water with just five percent over the course of the year. Against the background of the severity of the March sell-off, this is a good and justifiable result, especially in view of the stable distributions, which in turn is also due to the distribution reserve. The allocation in the fund is classic with two-thirds bonds and a quarter stocks, supplemented by some cash and a few positions in convertible bonds. However, the portfolio is also quite international, with 15 percent of the funds invested in the USA. So the global accents are in place, and that will also be needed in the future with a somewhat European allocation. Overall, the V shows that the Hamburger Stiftungsfonds can keep up with the markets, even if the recovery continues. At least that's what the last days of May indicate.

The final apercu

Endowment funds have not had it easy recently. First the low interest rate hit them and let the distributions melt away, then came the Corona and with it the Corona crash and milled dents in the charts, which foundation funds really want and have to avoid. Nevertheless, it can be stated that the foundation funds analyzed here have done well and so far have largely managed a V-shaped recovery. How things will continue in the coming weeks, whether the mostly half will become a full V, or a root sign or at least a W, remains to be seen. The endowment fund allocations, however, appear to be prepared for more than one scenario.