The best managed funds of 2022

Cologne People can currently see what the term inflation means at supermarket checkouts or petrol stations. In the euro zone, it was most recently at almost eight percent. And the first economists are even forecasting double-digit inflation rates for the summer in Europe if the war in Ukraine continues to drive up energy prices and the supply chains remain fragile. Many investors are concerned about this.

If you park your money in a savings book or fixed-term deposit account, you will still get nothing. The interest rate is 0.0 percent, with high investment amounts sometimes penalty interest is due. Fixed-term deposits, savings accounts, long-term savings contracts or ten-year government bonds with a current yield of 0.5 percent have not been a real alternative for long-term asset accumulation for years. This already applies to one to two percent inflation. The more currency devaluation increases, the quicker investors save themselves poor with interest-bearing securities.

It is not surprising that even conservative financial experts primarily recommend equities and investment funds to investors. Stocks collapsed at the beginning of the corona crisis, but recovered. Even the Ukraine war has so far only resulted in a brief slump. In the long term, stocks and funds have generated superior returns compared to savings investments.

Experts recommend that investors keep their nerves in times of crisis – or that they resort to unit-linked pension insurance. Here, monthly savings installments are invested in actively managed investment funds and listed ETF index funds. The main choices are equity funds and mixed funds, but also commodity, real estate, bond and money market funds.

Customers can choose the funds themselves and, if necessary, exchange them during the term. Investors can also save themselves the trouble – with managed policies. Customers leave it up to their insurance company to select individual funds or direct investments. They only indicate one direction, such as defensive, balanced, dynamic or growth-oriented, with increasing equity fund shares in each case.

Trust often pays off. “Customers were again very satisfied with the quality of the managed policies in 2021,” says Lars Heermann, Head of Analysis and Evaluation at the insurance rating agency Assekurata. “They again performed significantly better than free funds.”

Improved overall result

For the third time, Assekurata has examined the managed fund policies of insurance providers for the Handelsblatt. This year, 20 companies, four more than in the previous year, sent back the questionnaire for their 92 managed funds. The evaluation was carried out in the same way as Assekurata’s “Fonds-Tacho” for free funds in the categories of return, risk, responsiveness and risk reward.

In the assessment, the agency used all freely available funds with the same risk class (SRRI) as a reference. The managed funds in the test are long-term investments and rank in classes three to six. Overall, the scale ranges from one (very defensive) to seven (very risky).

“The funds with the low and medium risk classes have achieved the best grades on average,” says Heermann. The overall ratings show that the insurers are doing a good job with the managed policies. 17 of the 20 participants achieved an average rating of at least 60 points and thus received the grade “very good”. Two managed a “Good” and only one had to settle for “Satisfactory”. The average number of points achieved at portfolio level rose from 63 to 69 points compared to the previous year.

The company BL die Bayerische Lebensversicherung was the best provider and achieved 83 points with its only fund in the period under review that was based on sustainability criteria. Pangea Life invests as a property fund in wind farms, solar systems, hydroelectric power plants and battery storage. In recent years, around 322 million euros have been invested in projects in wind and water-rich areas such as Denmark and Norway or in sunny countries such as Spain and Portugal.

Sustainable energy projects are particularly sought after due to climate change and electricity prices have recently risen enormously. “In Spain, for example, they increased by almost 200 percent within a year,” says Uwe Mahrt, Managing Director of Pangea Life. This is the reason for the fund’s double-digit performance in 2021. Similar growth is already on the horizon for 2022. “Investors cannot count on such returns in the long term. But in contrast to stocks, Pangea Life is unlikely to fall even in weak years on the financial markets,” says Mahrt. “Because the revenues from our renewable energy power plants are secured in the long term.” Pangea Life also wants to use the Green Deal of the EU Commission and is planning projects in Poland.

Sustainability promises good returns

The trend towards sustainability is accelerating. Two years ago, Pangea was one of only six sustainability-oriented funds in the range examined. In 2020 there were 15 and in 2021 the number rose to 41. “The enormous increase is also due to regulatory requirements,” says Assekurata expert Heermann. Since 2021, fund providers have been obliged to state whether their portfolio is sustainable.

And from the summer of 2022, customers must be asked explicitly whether they want a sustainable investment. “Of course, providers should be able to make appropriate offers.” A focus on sustainability can be good for returns. The 41 funds with sustainability characteristics achieved an average of 70 points and were one point above the already good overall average.

The Alte Leipziger, in second place, shows that sustainability and low prices are not mutually exclusive. Three of four portfolios are sustainability-oriented and are equipped with ETF index funds. Their big advantage is the cost. In the case of major indices such as the Dax or Euro-Stoxx, they are sometimes below 0.1 percent, while actively managed funds require between one and two percent. “These additional costs have a negative effect on performance, especially over longer periods of time,” explains Dietrich Denkhaus, responsible fund manager at Alte Leipziger. The three portfolios contain 50, 75 or 100 percent stock ETFs.

The costs for this are between 0.18 and 0.21 percent. “The ETFs are selected based on around a dozen quality criteria, including the Morningstar rating,” says Denkhaus. “The ETFs are checked at regular intervals and, in the event of strong market fluctuations, the share quotas are also adjusted back to the benchmark.” Like the Alte Leipziger, more and more providers are relying on ETFs. 38 of the 92 managed policies focus on the inexpensive vehicles. The average score of 71 proves them right – at least in the up market like 2021. When the markets were particularly volatile due to the pandemic in 2020, they underperformed actively managed mutual funds.

The third-placed Stuttgarter Lebensversicherung also relies primarily on ETFs. “In 2019, we launched our fund pilot with initially five portfolios with increasing risk potential,” explains investment manager Iris Brehm. “The portfolios are not managed according to fixed equity quotas, but according to the conditional value-at-risk approach.” In this way, they adapt to the respective market conditions in different stock market phases and are intended to keep the risk within limits.

The Stuttgart strive to cover all markets. “If no corresponding ETF product is available, we also include actively managed equity funds,” says Brehm. The costs are then somewhat higher than with pure ETF providers. What is decisive, however, is what remains after the costs for investors. And the people of Stuttgart are very good at it. Both the original five funds and the five sustainable variants launched in 2020 achieved above-average returns and ratings of 70 points and more in the Assekurata test.

Shift in strategy by providers

The providers see themselves on the upswing overall. “Managed fund policies are the first choice for many customers,” says Heermann. The offer is growing. Numerous products were currently too young to be evaluated and will be tested for the first time in 2023. Some insurers have already announced new managed policies.

“One reason for this is the further reduction in the guaranteed interest rate for conventional pension insurance to 0.25 percent,” says Heermann. “Many companies are stopping new business with traditional products and relying more on unit-linked life insurance.”

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