Additional returns through the optimised use of exchange traded funds Photo: kynny Source: iStock

Risk optimised returns

Author: Dirk Heuser and Timo Lüllau

Achieving adequate returns proves challenging in ever more volatile markets. Dirk Heuser, head of portfolio management in Commerzbank’s Private Wealth Management division, is seeking to counteract this with a strategy designed to generate additional returns through the optimised use of exchange traded funds (ETF) in conjunction with conservative options management. In the interview with ChampionsNews, Heuser reports how this concept is successfully implemented in the Commerzbank Aktienportfolio Covered Plus (ISIN LU0372290675).

Dirk Heuser, Head of portfolio management Private Wealth Commerzbank Source: Commerzbank

ChampionsNews: Mr Heuser, your Commerzbank Aktienportfolio Covered Plus (ISIN LU0372290675) predominantly uses international ETFs. Why do you believe this to be advantageous?

Heuser: ETFs are a highly liquid asset class that can be traded at any point in time. Index funds give us the opportunity to adjust portfolios quickly as and when conditions in the capital markets change. In addition, ETFs enable us to diversify investments broadly thanks to the large number of shares in the relevant indices. This also mitigates risk in the overall portfolio. And the low costs of index funds have positive effects on fund performance.

ChampionsNews: Which markets do you use in the portfolio?

Heuser: We are currently covering the established markets with the ETFs. These include the DAX, Euro Stoxx 50 and the S&P 500. And we add an emerging market component without adhering to a fixed quota, which enables us to act very flexibly in the portfolio. We also don’t see volatility as negative because it offers opportunities for additional returns.

ChampionsNews: You use option strategies to improve the risk/return profile. When do they come into play?

Heuser: We use options whenever we have identified a promising opportunity to generate additional returns. We manage options very conservatively. When the Commerzbank equity portfolio Covered Plus sells options they are covered by stocks held in the fund. This enables us to generate additional returns that lead to improved performance in falling or sideways markets and also mitigate market risk. At the same time, however, this approach can limit the upside in a strong market rally.

We have been successfully using this investment strategy for a good 20 years

Dirk Heuser

ChampionsNews: You now make this strategy with its long successful track record available to a broader client base …

Heuser: We have been successfully using this investment strategy for a good 20 years in Commerzbank’s private wealth management. Since we have seen increasing interest for this product from outside the Commerzbank network over the past years, we decided to comply. After all, this strategy is very attractive for many investors in times of volatile stock markets and low interest rates. 

Author: Dirk Heuser and Timo Lüllau
Date of issue: 9/25/2018