- For conservative investors, dividend funds offer an interesting alternative in these times of zero interest rates.
- Those pursuing investments that are sustainable as well should seek enterprises that comply with the respective ESG criteria.
- The DWS Invest ESG Equity Income fund has successfully combined these two investment criteria for three years now.
The newest member of the DWS dividend family is celebrating a birthday: DWS Invest ESG Equity Income is now three years old - happy birthday! Since the fund’s launch on August 7, 2017, private investors can now also benefit from DWS’ many years of specialized expertise in managing dividend funds as well as in sustainability. This experience reaches back to 2013 when these two investment approaches were first combined for institutional investors. So, it was only logical and consistent to expand our portfolio to include a mutual fund for private investors as well.
The fund’s success has confirmed the wisdom of this decision by the DWS dividends team. DWS Invest ESG Equity Income, headed by fund manager Martin Berberich, has now grown to over 600 million euros. The investment strategy captures the spirit of our times - and doubly so. In this age of zero interest rates and to some extent even negative returns on government bonds, there are few conservative investment alternatives to higher dividend equities. At the same time, interest in sustainable investments is growing considerably in response to the debate surrounding climate change and the reduction of CO2 emissions. Not even the crisis surrounding the corona virus can displace this as the number one problem to be tackled by the German government during its current tenure as EU Council Presidency, as shown by the “ARD-DeutschlandTrend” survey conducted with a representative sample of registered voters.[1]
50 % of the German citizens surveyed indicated that they consider climate change the most important problem to be pursued by their government during its current EU Council Presidency.
Sustainability is more than just environmental protection
Sustainable investment involves much more than just climate protection. It encompasses not only environmental protection but also social aspects and corporate leadership, hence the acronym ESG (environmental, social, governance). It reflects the desire of many investors to not only achieve good yields with their capital but also to have a positive impact. The two are not mutually exclusive, and often go hand in hand. For example, the risk of a costly environmental scandal is lower for ESG-compliant enterprises. Those providing better workplace conditions enjoy an enhanced reputation among their employees and customers – which often has a positive effect on the company’s long-term business development.
How funds take ESG criteria into consideration
How does DWS apply ESG criteria to the way it manages investments for the DWS Invest ESG Equity Income fund? “In selecting equities, we focus not only on parameters such as dividend yield, dividend growth, and payout ratio but also on information provided by DWS’ own ESG-engine”, says fund manager Berberich. This algorithm analyses data from five specialized rating agencies to not only detect potential hazards and identify warning signals but also to create a list of best prospects. “We use a two-pronged approach in that we eliminate candidates that, for example, earn their revenue from controversial business sectors such as tobacco or weapons while at the same time taking a closer look at other candidates that we have identified as ESG as per best-in-class principle”, states Berberich.
Sophisticated analysis
The fund actually goes one step further to specifically identify companies focusing on sustainability issues such as renewable energy or climate change. “Companies such as these may be more sensitive to economic downturns than we’d normally prefer,” says the fund manager “but we accept this because their long-term focus on sustainability generally helps them cope quite well with such fluctuations.”
In addition to using objective data on dividends and ESG, Berberich and his team also draw on their long-standing relationships with many enterprises, which enables the team to fine-tune their analyses. “In many cases, we have very good access to the respective management and each year meet with thousands of those responsible. These discussions often result in new ideas for investment.”
Option for conservative investors
Berberich also pays particular attention to having an asymmetric risk/return profile. He manages the fund in such a way that it doesn’t fully benefit from any upswing in equity markets, but on the other hand suffers far less than the overall market from any stock market downturns. Together with its focus on companies characterized by strong dividends and stability, this should hold special appeal for conservative investors “especially in the current decade of zero interest rates,” says Berberich. It allows these investors to take advantage of dividends and stock market opportunities with less exposure to the associated risks.
The fund management’s obvious goal is to ensure that DWS Invest ESG Equity Income performs well – in fact, better than the global equities market as a whole – while continually monitoring its development and making revisions to account for risks. So far, this strategy has proved very successful: since its launch, the fund has had a cumulative performance of 14.8 percent or annually 4.73 percent.[2]Even the market crash resulting from the corona crisis had a relatively minimal effect on the fund, with its portfolio of companies exhibiting strong balance sheets and stable business models. Price corrections were, in fact, in some cases used to strengthen the fund’s holdings in companies whose shares were previously (too) highly priced.
DWS Invest ESG Equity Income LD - Facts
- Total Assets 659.42 M EUR
- Fund assets (share class) 187.27 M EUR
- Earnings Distribution Fiscal year 01.01. - 31.12.
- Risk/Reward Profile 5 of 7
- Order Cutoff Time 16:00
- Expense Front-end Load 5.00%
- Management Fee 1.500%
- Plus performace-related fee No Current costs (Status: 31.12.2019) 1.690%
DWS Invest ESG Equity Income LD - Riskohinweise
DWS Invest ESG Equity Income LD - Wertentwicklung der vergangenen 12-Monatsperioden
| 12.08.2019 - 12.08.2020 | 12.08.2018 - 12.08.2019 | 12.08.2017 - 12.08.2018 | 07.08.2017 - 12.08.2017 |
| 3.58% | 7.50% | 7.20% | -1.21% |
Forecasts are not a reliable indicator of future performance. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analyses that may prove to be inaccurate or incorrect.
