Vermögensstrategie: buy an ETF and a strategy

David Tuckwell

a glass bottle and a napkin on a table

Vermögensstrategie by Commerzbank allows investors to buy an ETF which functions as an investment strategy. But will it work?

ETFs started off simple, tracking things like the S&P 500 and bars of gold. They did this by buying S&P stocks and bullion, which was easy and transparent. As time has gone by, ETFs have gotten more complicated.

Multi-asset ETFs are at the frontline of this increasing complexity.

What are they? Most ETFs fall under one of three categories: bond trackers, equity trackers and commodity trackers. But multi-asset ETFs can track all three, and track all three at the same time. They can even track other ETFs, becoming a 'meta-ETF' of sorts.

Swiss investors got an example of this this week when Germany's very own Commerzbank cross-listed its Vermögensstrategie ETF (CBVS) over the border, which translates to asset strategy.

CBVS is a multi-asset ETF. It takes the traditional portfolio blend of 60% equities, 30% bonds and 10% commodities and crams it all into a single product. CBVS is exposed to equities and bonds all over the world, as well as a basket of commodities.

CBVS achieves this exposure by referencing other ETFs. Using swaps, it tracks 12 Commerzbank ETFs, making it a one stop shop for a diversified ETF portfolio. According to Commerzbank's website:

(Translation by the Daily ETF Monitor, not attributable to Commerzbank).

"The new multi-asset ETF offers private investors who would like to save themselves the time and cost of putting a portfolio together the possibility of investing in a highly diversified portfolio with only one investment."

Commerzbank is not the first German issuer to pull of this kind of rabbit out of a hat. db-x trackers have a similar product called the db-x tracker Portfolio Total Return UCITS ETF 1C, which has been around for nearly ten years. But the db-x product doesn't have any commodities exposure.

There are many questions that arise from these sorts of multi-asset strategy ETFs.

The first concerns the target market. Specifically: who is it? If it's retail investors, how likely are they to trust derivatives? If it's sophisticated investors or institutions, will they need an ETF issuer to come up with an investment strategy for them?

Other questions relate to cost. The total expense ratio of CBVS is 0.49% -- which is low compared with active management, but high compared with plain vanilla ETFs. Here the question is how much are investors willing to pay for the convenience (assuming they view it as a convenience)?

The other question is diversification. CBVS, and this might be a positive for some, is heavy on German stocks and light on North American. This is perfectly understandable considering it's coming from a German issuer and German investors, like investors everywhere, will have some kind of home bias. But will this work in other countries, like Switzerland?

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