Attractive Opportunities.
Controlled Risk.
Quantitative Fund Management.
DekaBank Deutsche Girozentrale
www.deka-institutional.com
Foreword.
Dear Investors,
More than 15 years ago, Deka Investment made the
decision to establish an independent quantitative
investment style. Today, we are one of the largest
quantitative teams in Germany and Europe – a success
story that hardly anyone expected at the beginning.
We use a systematic approach for all of our strategies.
Our purely quantitative investment process is based on
fundamental relationships. Our models capture and
analyse the flood of information on the markets. The
result: transparent, verifiable investment decisions.
Income return proportional to the portfolio risk is at
the core of our decision making.
We have been able to consistently demonstrate the
stability of our performance in the past. Our models
continued to function, even during the difficult times
of the financial crisis.
instead of chasing every fashion, our use of a sustainable approach for investment has paid off. We want to
focus on our strengths to create added value for investors. We pay particular attention to the transparency
of our decisions. After all, we are dealing with your
assets. Our consistent and disciplined use of models,
and the clear and systematic investment process allow
us to provide explanations for our investment decisions and how they are implemented at all times.
Innovation is particularly important in our team. Product research and development incorporates a wide
range of perspectives. Our investment professionals
combine their diverse academic backgrounds to continuously develop innovative approaches and investment solutions.
Sincerely,
Dr. Ulrich Neugebauer
”Our investment style is based on three constants: a
systematic approach, transparent decisions and stable
performance.“
Dr. Ulrich Neugebauer,
Head of Quantitative Fund Management
Managing Director Deka Investment GmbH
Contents.
Foreword2
01 Quantitative approach
4
Theoretically and empirically sound
6
Broad range of product solutions
7
Quantitative asset allocation
8
Proven institutional mutual funds
10
Trend following
11
02 Portfolio management
12
Quantitative equity funds
12
Quantitative fixed income funds
14
Exchange Traded Funds
16
Risk management
17
03 Implementation examples
18
Implementation example: Savings bank
19
Implementation example: foundation
20
Implementation example: pension fund
22
Individual support
24
04 Deka Institutional
25
DekaBank – Outstanding service
26
Contact
27
01
Quantitative approach
In volatile markets,
systematic investment counts.
The situation in capital markets has been particularly challenging since 2008 and is
made worse by the environment of historically low interest rates since 2011. Adequate
returns are needed in order to meet day-to-day obligations. Instead, returns are falling, investments are increasingly more regulated and risk budgets are low. Investors
therefore need an approach that allows them to systematically take advantage of
market opportunities.
Deka Investment has developed a purely quantitative
investment process based on fundamental relationships to capture and analyse the flood of market information. We make investment decisions that are fully
transparent and verifiable, whilst controlling for risk at
all times. Comprehensive, in-depth analysis helps us to
realistically assess investment performance in advance
in order to avoid unpleasant surprises.
The investment philosophy entails:
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4
Extensive research as a basis for model development
F ocus on proprietary forecasting and risk models –
no “black boxes”
areful verification of model results under changing
C
market conditions
ontinuous monitoring of performance and risk
C
parameters
Continuous optimization of existing processes
Facts and figures.
290
41
40
Quantitative fund
management manages over
290 mutual and
institutional funds.
More than 41 billion euros in
assets under management.
More than 40 investment
professionals work in
quantitative fund
management.
Investment process and risk management.
Forecast
models
Research
Model
development
Portfolio
management
Performance
analysis
Risk
models
Information feedback
Source: DekaBank
Investment concepts for every riskreturn profile.
We offer our clients investment concepts for all major
asset classes. We devise individual solutions by combining proven asset class strategies. Funds are tailored
exactly to the desired risk-return profile of the investor,
who often wants to avoid losses beyond a certain
threshold and therefore to concentrate on low absolute risks.
As of 03/ 2016
Systematic implementation.
Meeting these requirements means adhering to a
disciplined and proven approach. This is the only way to
identify attractive return opportunities in an increasingly
complex and dynamic market environment and turn
them into investment strategies. Active investment
decisions combined with professional risk management
are required.
Many investors require:
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Targeted risk management
P rotection against volatility and drawdowns
in extreme market phases
P rofessional risk management using
state-of-the-art methods
5
Theoretically and empirically sound.
Transparent and systematic.
An integrated approach to quantitative investment strategies.
We take great care in advising our clients. Client portfolios are managed using a clearly defined quantitative
investment process. Investment decisions are transparent. The investor‘s risk-return profile and individual
constraints provide the framework for the implementation of models in the portfolio. Direct contact between the investor and a specialist is essential for this
process.
Deka Investment uses an integrated approach to quantitative investment strategies – all the way from the
first client meeting to the ordering of securities.
Integration of theory and practice.
In 2013, DekaBank established IQ-KAP, a private insti­
tute for capital market research. It provides a forum
for academics and practitioners to discuss current
topics, take part in research projects and introduce
their own ideas. Our investment professionals incorporate the find­ings into their own research process.
IQ-KAP
Forum for research and practice.
This creates added value for our investors in a
number of different ways:
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lear processes and a manageable team size allow
C
investment decisions to be implemented quickly.
ur investment approach is theoretically and empiriO
cally sound.
isk management is a basic component of the
R
investment strategy.
The core mission of IQ-KAP is to perform
quantitative research in the area of capital
markets and prepare academic papers in
cooperation with universities and partners. Modern methods are used to
empirically investigate and explain capital
market phenomena and answer fundamental investment-related questions.
More information:
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6
S trategies are continuously developed using the
latest academic research and methods.

www.iq-kap.de
Broad range of product solutions.
Tailored solutions using modular
products – Modular flexibility.
We offer institutional investors a variety of ways to
implement their market views and investment strategies. Due to the modular design of our products, we
can offer solutions that are precisely tailored to individual risk-return profiles.
Selected investment concepts.
Quantitative fixed income funds
Quantitative equity funds
Trend-following strategies
Exchange Traded Funds (ETFs)
Source: Deka Investment
Broad range
of investment
solutions
Overlay management
Globale tactical
asset allocation (GTAA)
As of 03/ 2016
7
Quantitative asset allocation.
The Quantitative Asset Allocation team is our centre of competence for solutions
managing multi-asset class funds with risk-controlled investment approaches and
efficient management of risk budgets.
The solutions range from benchmark-based investment concepts to our global tactical asset allocation
(GTAA) products with a focus on total return. Core
building blocks are quantitative-fundamental, trendfollowing and pure risk management strategies.
We offer our clients a wide range of product
solutions:
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enchmark-free strategies based on
B
fundamental data
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Trend-following investment strategies
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Pension products
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se of hedging strategies1 at the individual
U
asset and portfolio levels
Facts and figures.
24.7
177
The team has more than
24.7 billion euros in assets
under management.
The different asset allocation
strategies are implemented
in 177 portfolios.
Dr. Heiko Opfer
Head of Asset Allocation
Our risk management approach is the common thread
connecting all of these products. Our approach goes
beyond the traditional analysis of markets, credit risks
and liquidity risk. When calculating the optimal allocation structure, we include explicit modelling of fat tails
and take into account the predictive power of our
return estimates.
We also have many years of expertise implementing
risk management and portfolio insurance solutions.
Our goal is to use the clients risk budget as efficiently
as possible, whether for a pension solution, an institutional fund or an overlay in a master fund.
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17 years of investment experience
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Doctorate in economics
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At Deka since 2004
Volatile capital markets require flexible
investment decisions and sophisticated
risk management. The Asset Allocation
team offers clients a broad range of
custom-tailored solutions. The quality of
these products is underscored by a
successful long-standing track record.
1 No guarantee is provided that the use of these portfolio insurance strategies will lead to successful realisation of desired investment objectives.
8
Quantitative GTAA – consistent focus on
individual risk-return profiles.
The majority of investors focus on absolute risks, which
leads to the question: What portfolio can I use to achieve
the maximum return while satisfying my risk budget?
We have been using the quantitative GTAA investment
concept to answer this question for more than 15 years.
We combine modern optimisation approaches with
fundamental-quantitative forecasting models that are
proven both theoretically and empirically.
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e use macroeconomic data when generating our
W
forecasts in order to include estimates of long-term
economic growth and its implications for capital
markets. The quality of our forecasts is also taken
into account.
ur proprietary optimisation model determines the
O
allocation among asset classes that provides the
highest potential return for a given level of risk.
Risk management is an integral part of portfolio
management.
Facts and figures.
5.6
48
More than 5.6 billion euros
is currently invested in
quantitative GTAA funds.
This proven concept is
being used for around
48 portfolios.
Custom-tailored investment concepts.
A portfolio is only optimal if client-specific constraints
and possibilities for expanding the portfolio are taken
into account.
Investment restrictions with respect to equity allocation,
duration ranges, use of derivatives, foreign exchange,
granularity, sustainability and hedging strategies are
systematically integrated.
The core investment universe of the product consists
of global equity and fixed income investments that have
proven their diversification potential during periods of
crisis. The investment universe can be restricted to
euro-denominated investments, or can be broadened.
Exended Investment Universe.
Basic fixed income investments:
Basic equity investments:
Core Eurozone government bonds
(DE, FR), USD, YEN, GBP
Germany, France, Italy,
Holland, Spain, Switzerland,
United Kingdom, Denmark,
Sweden, United States,
Canada, Japan, Australia
Possibilities for expansion –
fixed income:
Eurozone PIIGS and emerging
market government bonds,
EUR covered bonds,
IG EUR & US corporates
Possibilities for expansion –
equities:
MSCI Emerging Markets
Possibilities for expansion –
alternatives:
Commodities ex agriculture,
currencies and volatility
Source: Deka Investment – illustrative chart
9
Proven institutional mutual funds.
Our quantitative GTAA approach forms the basis for two product lines, Sigma Plus and
GlobalOpportunities Plus, and is implemented through four institutional mutual funds
for different risk appetites. Two of these were specifically designed for foundations
and municipal investors.
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Sigma Plus Konservativ1 is the standard variant of
the defensive investment concept and invests in the
core universe with a maximum of 20 % in equities.
Deka-Stiftungen Balance1, a mutual fund for foundations, uses a sustainability filter for its asset classes
and makes distributions quarterly.
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eka-Kommunal Euroland Balance1, a fund launched
D
for municipal investors, is designed to appeal to risk
averse investors and uses, for example, the Deka
LowRisk strategy when selecting equities.
eka-GlobalOpportunities Plus1 has a moderate risk
D
profile and can serve as a proxy for an investment in
global equities. The fund also takes advantage of
short positions and leverage.
1 Ongoing charges incurred during the financial year (FY) of the fund: Deka-Stiftungen Balance: 1.170 % (FY 03.2014-02.2015); Deka-Kommunal Euroland Balance I (A):
0.970 % (FY 11.2014-10.2015); Deka-GlobalOpportunities Plus I (A): 1.070 % (FY 01.2014-12.2014). The ongoing charges may vary from year to year and do not include
costs for buying and selling securities (transaction costs) or any fund performance fees. They do, however, include all costs incurred for investing in other funds, if such costs
represent a significant percentage of the fund assets (e.g. for funds of funds). Additional legal information on ongoing charges is provided on page 26.
10
Trend following.
Use Eurotrend to participate in the
capital markets.
The goal of a trend-following strategy is to identify market trends in timely fashion and take appropriate positions to participate in the trend for as long as possible.
The real challenge is to develop an approach that can
correctly identify trend movements. How does a real
trend differ from an erratic fluctuation? What position
should a trendfollower take in a highly volatile sideways-moving market? This situation is particularly dangerous and leads to numerous incorrect decisions. The
requirements outlined here were taken into account
more than ten years ago during development of our
Eurotrend Balance and Eurotrend Renten / Fixed Income
trend-following systems.
The following product lines have been available
on the market for many years:
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Deka-Euroland Balance1: This conservative balanced
fund was the first mutual fund launched with this
concept in 2003 and has since impressively documented that Eurotrend can also achieve attractive
returns in volatile markets and markets affected
by crises.2
Deka-Balance Dynamisch1: This fund uses flexible
investment limits and can invest fully in fixed income
securities, equities or liquidity depending on the
market situation.2
Facts and figures.
These systems are based upon a quantitative technical
model developed by Deka that uses proprietary indicators to provide high quality information for the identification of trends. The indicators provide information
on whether the capital market being analysed is in an
upwards or downwards phase.
Further information on the reliability of the trend, the
risk situation and the quality of the trend identification
are also used when taking a position.
10
61
10 billion euros in assets is
currently under management in Eurotrend concepts.
61 portfolios are being
managed using Eurotrend
concepts.
The Eurotrend-Balance and Eurotrend Renten / Fixed
Income product lines were introduced in 2001 and
represent one of our core areas of asset management
competence.
The investment universe consists of Eurozone equities
and government bonds. As a rule, investments are
made to match the benchmark and derivatives are
used to take active positions.
A security selection component and / or portfolio
protection strategy can also be added depending on
client needs.
1 Ongoing charges incurred during the financial year (FY) of the fund: Deka-Euroland Balance: CF 1.020 % (FY 01.2014-12.2014); Deka-Balance Dynamisch I (A): 0.970 %
(FY 10.2014-09.2015). The ongoing charges may vary from year to year and do not include costs for buying and selling securities (transaction costs) or any fund performance fees. They do, however, include all costs incurred for investing in other funds, if such costs represent a significant percentage of the fund assets (e.g. for funds of
funds). Additional legal information on ongoing charges is provided on page 26. 2 Past performance is not a reliable indicator of future performance.
11
02
Portfolio management
Systematic processes –
transparent decisions.
Quantitative equity funds.
Deka Investment is a pioneer in the field of quantitative portfolio management in
Germany and Europe. Our equity product range includes strategies such as LowRisk,
Core equities, value equities and dividend focus.
The Quantitative Equity team develops and implements model-based approaches for active management. Deka has had a quantitative investment process
since the 1990s and we were quick to complement it
with proprietary risk models ahead of the competition.
Facts and figures.
5.3
5.3 billion euros in assets
are managed using our
quantitative approach.
Keeping control of absolute risk.
Our Deka LowRisk Equity product line is designed to
answer client demands for stability. It is a benchmarkfree approach that aims to reduce absolute risk while
achieving an attractive risk-return ratio. The absolute
risk of the portfolio is reduced using an integrated
risk management approach focused on mitigating
extreme losses.
27
4.3
27 quantitative equity
funds are managed.
4.3 billion euros is
currently invested in
LowRisk equity strategies.
Expected risk-return profile of quantitative equity strategies.
Expected annual return
Core equities
Deka-Europa Aktien Spezial
Deka LowRisk equities
Market portfolio
Minimum-variance portfolio
Expected annual risk
Source: Deka Investment – chart illustrating the function of the different strategies
12
Comparable risk, higher return opportunities – Unique in the German market.
We offer several LowRisk mutual funds that differ
according to investment universe – Eurozone, Europe
and global. In addition, Deka-Europa Aktien Spezial1
offers a leveraged form of the LowRisk strategy,
something that is unique in the German market. It
aims to achieve a higher return than the index in a
variety of market phases but with a comparable level
of risk.
Our Core equities strategy has been offered since the
end of the 1990s and provides a strong, benchmarkbased product that invests in equities that appear
attractive based on a combination of criteria. The dividend focus of the value style or approach allows and
enables the investor to access additional sources of
return.
Sven Thießen
Head of Quantitative Equities
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Our Quantitative Equity team manages the following
mutual funds:
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Deka-Globale Aktien LowRisk1
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Deka-Euroland Aktien LowRisk1
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Deka-Europa Aktien Spezial1
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Deka-EuropaValue1
24 years of investment experience
asters level degree in business
M
administration
At Deka since 1997
Equities are becoming more attractive to
many investors again due to the ongoing
low interest rate phase in bond markets.
Sven Thießen and his team use an integrated approach to risk to develop a
wide variety of investment strategies.
This allows every investor to find a
suitable solution to match their individual
risk profiles.
The equity strategies mentioned above are also used
for multi-asset mandates.
1 Ongoing charges incurred during the financial year (FY) of the fund: Deka-Globale Aktien LowRisk I (A): 1.090 % (FY 12.2014-11.2015); Deka-Euroland Aktien LowRisk CF
(T): 1.490 % (FY 11.2014-10.2015); Deka-Europa Aktien Spezial I (A): 1.010 % (FY 11.2014-10.2015); Deka-EuropaValue CF: 1.510 % (FY 10.2014-09.2015). The ongoing
charges may vary from year to year and do not include costs for buying and selling securities (transaction costs) or any fund performance fees. They do, however, include all
costs incurred for investing in other funds, if such costs represent a significant percentage of the fund assets (e.g. for funds of funds). Additional legal information on ongoing charges is provided on page 26.
13
Quantitative fixed income funds.
Quantitative fixed income management has offered custom-tailored fund solutions
for institutional clients for more than 12 years. Government bonds, covered bonds
and corporate bonds have rarely presented investors with such complex problems as
today. As a result of low yields and increased regulation, achieving the steady flow of
returns needed is scarcely possible any more using customary targets, risk profiles,
investment limits, etc.
In order to satisfy increased investor requirements, we focus on:
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reating modular custom-designed fixed income
C
portfolios based on a risk-controlled investment
process
sing a systematic approach to select bonds with
U
attractive risk-return ratios
The investment process also includes comprehensive
management of market and credit risks. Risks are
further reduced by the use of broad diversification and
controlled, active weighting of individual issuers.
Transparent, verifiable decision-making processes
Sources of return.
Facts and figures.
Duration
Allocation
Spread
Yield curve
Currency
Absolute risk (CPPI)
Rolldown
Selection
Active client portfolio
Source: Deka Investment
14
We have used this approach for years to generate
additional returns through active yield curve management and flexible allocation and selection decisions.
We use long-term fundamental relationships to predict
yield levels and spread changes.
3.7
30
3.7 billion euros in assets is
managed in quantitative
fixed income funds.
30 quantitative
fixed income funds
are managed.
Deka LowRisk Corporates.
Risk-optimised investments in corporate bonds.
Given low expected returns, investors are increasingly
looking for ways to optimise potential returns while
adhering to a limited risk budget. Corporate bonds
continue to offer a good opportunity to improve
current income without increasing the overall interestrate risk of a portfolio. The usual weighting based on
market capitalisation increasingly leads to investing in
high-debt issuers. In contrast, a portfolio strategy that
focuses explicitly on risks specific to corporate bonds is
an attractive addition to the range of investments
available.
Dr. Michael Wegener
Head of Quantitative Fixed Income
Products
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Avoiding subjective influences –
The advantages of long experience.
Most asset managers follow a traditional approach
that may include quantitative techniques, but is predominantly based on subjective assessments – at both
the allocation and selection levels.
A few competitors offer pure quantitative approaches.
Deka Investment has the advantage of many years of
experience compared to these competitors. As a
result, we can offer our investors stable concepts for
all market phases. Our track record for quantitative
fixed income funds goes back to 1999. The first independent institutional fund was launched in 2001.
We also use our knowledge of academic research combined with our own research to realistically assess the
on-going quality of a quantitative investment approach.
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14 years of investment experience
octorate degree in business adminisD
tration with a focus on finance and
statistics
At Deka since 2004
Fixed income securities are the core of a
portfolio for many institutional investors.
The team develops modular, customtailored concepts based on a risk-controlled investment process. The quantitative investment process uses proprietary
research and academic findings. Customised risk management and efficient
implementation in client mandates are an
integral part of the investment process.
15
Exchange Traded Funds.
Exchange traded funds supplement our active quantitative fund management.
Investors can make a broadly diversified investment with just a single transaction.
Flexible stock exchange trading ensures high liquidity.
Deka ETFs are stock exchange traded index funds that
replicate reference indices and their performance with
high precision. Whenever possible, they aim for full
index replication. Unlike synthetic methods, the original
securities included in the index are also used for replication. This provides our investors with high transparency and the best replication quality.
Deka ETFs can be used for many investment strategies
and offer a number of possibilities for institutional
investors in particular:
Overview of Deka ETFs.
Equity ETFs
Standard equity ETFs
Strategy equity ETFs
Fixed income ETFs
German government bonds
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Broad diversification
European government bonds
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Liquidity and flexible trading
Corporate bonds
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Low total expense ratio
Jumbo covered bonds
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High replication quality and transparency
French government bonds
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Tax advantages under corporate income tax law
Implementation of passive investment
strategies.
In addition to direct ETF purchases and adding ETFs to
actively managed investment funds, we also enable
institutional investors to invest in the passive replication
of a market. Deka ETFs are therefore ideally suited to
passive investments and our team know-how offers
significant cost advantages.
Facts and figures.
7
43
8
We have EUR 7 billion in
assets under management
in the ETF business unit.
The ETF business
unit manages more
than 43 funds.
Our ETF unit is staffed
by 8 employees.
Investors subscribing to and purchasing fund units should be aware that this product involves certain risks and the amount repaid may be less than the amount of
capital invested. In the worst case scenario, total loss could occur.
16
Risk management.
Overlay Management.
Dynamic risk management.
Risk management across the mandate as a whole.
Institutional investors are currently under pressure from
two sides. The low interest rate environment makes it
difficult to achieve return targets and is forcing investors into riskier allocations. In addition, unexpected
capital market volatility places increased demands on
risk budgets that have often already been permanently
strained by past financial market crises.
Multi-layer hedging concept.
The core of an overlay is dynamic risk management
at the overall fund level, consisting of continuous
monitoring of assets and timely, forward-looking
analysis of risks. Based on these two sources of information, derivatives are used to meet risk limits at the
overall fund level.
Overlay management can address this conflict between
the need to maintain a strategic orientation and shortterm risk avoidance. We therefore offer our clients overlay management at the master fund level that uses active
risk management to limit losses and makes the best
possible use of tight risk budgets in capital markets.
Our risk analysis goes far beyond traditional value-at-risk.
Only a tightly integrated network of position-keeping,
price data and risk analysis systems using the latest
academic findings can ensure compliance with an
agreed lower bound for fund value. We also make
efficient use of what is generally a tight resource – the
risk budget – at the master fund level.
Dynamic risk management.
Fund price
Real time
monitoring of
assets and
risk budget
Buffer
Value lower bound
Risk
Timely risk
measurement
and analysis
Portfolio structure
Reduce risks
January
April
Risk management
using derivatives
and risk limits for
segment managers
Make greater use of opportunities
July
September
December
Source: Deka Investment – illustrative chart1
1 Chart illustrating the operation of dynamic risk diversification in overlay management. The performance shown is not an example of real performance and is not a reliable
indicator of future performance.
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03
Implementation examples
Quantitative management
in practice.
We develop custom-tailored solutions to meet the individual needs of our institutional
investors. The following case examples illustrate the procedure we follow and the
criteria we use in our advisory process and for portfolio construction.
Case example 1.
Case example 3.
Reallocation using the same risk budget.
In order to compensate for a return shortfall from traditional fixed income investments, securities account A
of a Savings bank was repositioned so that existing
equity risks could be used more efficiently.
Investment to match the structure of obligations.
A portfolio was modelled to meet a variety of different
liability structures for pension fund investments.
A total-return concept was chosen for implementation.
Case example 2.
Dynamic allocation management.
New asset classes / investment opportunities were
added to a foundation portfolio in order to generate
adequate returns. At the same time, the portfolio
aims to achieve stable performance and satisfy sustainability criteria.
18
Implementation example: Savings bank.
Case example 1: Reallocation using the
same risk budget.
Our concept.
The challenge.
A large number of our clients face this challenge: the
returns from traditional fixed income portfolios are
inadequate to provide expected returns in a low interest
rate environment. This specific case concerns a Savings
bank with total assets of 2.5 billion euros. The mix of
investments is typical for an institution of this size.
Hedged increase in the portfolio
equity allocation based on the
LowRisk strategy.
The traditional equity investment used to
date was replaced by a LowRisk equity
strategy. LowRisk concepts focus on the
long-term expected returns from equities
while simultaneously attempting to
reduce risk of loss. Historical data shows
that a reference fund managed using
the LowRisk approach regularly did better
than its pan-European benchmark index
over the last five years – both in terms of
performance and risk factors.1
Initial position.
The total investment is 100 million euros. To date,
80 percent has been invested in fixed income and
20 percent in equities. Government bonds and
covered bonds represent 40 percent of the fund and a
further 20 percent is invested in companies in the
EURO STOXX 50®.
Our client will be using a LowRisk strategy
for its equity investments in the future,
allowing it to raise its equity allocation
to 27 percent while maintaining the
same level of risk.
Systematic repositioning.
Based on these requirements, we performed a strategic
analysis to calculate how much leeway was available
for structuring the portfolio in accordance with the
required risk budget. The key question was, how can
the existing equity risk be used more effectively to
achieve additional, stable returns?
Change in portfolio structure.
German
covered
bonds
40%
Eurozone
government
bonds
40%
German
covered
bonds
36,3%
Eurozone
government
bonds
36,3%
DJ EURO STOXX 50
DJ EURO STOXX 50
20%
27,4%
Source: Deka Investment
As of January 2014
1 Past performance is not a reliable indicator of future performance.
19
Implementation example: foundation.
Case example 2: Dynamic allocation
management.
The challenge.
Our client is a foundation with 90 million euros in
assets. The foundation assets should generate a regular
2.5 percent return in order to fund the foundation
objectives and achieve sustainability.
Initial position.
In order to ensure that the foundation assets were
preserved, investments were made exclusively in secure
fixed income securities in the past. The foundation has
relied on traditional benchmark concepts to date. The
risk is that achieving the objective – investment outperforms the benchmark – does not necessarily mean
a positive return.
20
Our concept.
Systematic repositioning.
Instead of a one-sided fixed income
orientation for the portfolio, we recommend that the client use a dynamic
allocation management, which adjusts
the fixed income and equity allocations
based on market conditions. The strategy
should aim at collecting risk premiums in
a variety of capital markets while simultaneously making regular distributions and
stable performance possible.
Combination of capital preservation and
risk-adjusted returns.
This strategy is implemented using a fund specifically
designed for foundations, Deka-Stiftungen Balance1.
Our forecasts of the opportunities and risks of all eligible assets are used as the starting point for allocation
decisions. The mix of fixed income, equities and liquidity which offers the highest return opportunities
while not endangering capital preservation is determined on a monthly basis.
Securities are selected based on a clear requirement
to choose only investments with an attractive riskreturn profile in each category. Sustainability criteria
are also taken into account at all times.
Quantitative GTAA – multi-level allocation management.
Fundamental valuation
of asset classes
Optimisation process
Risk assessment
of asset classes
Asset allocation
Optimal portfolio
Selection of equities
Active individual security selection
Portfolio weighting
Selection of fixed income
Active maturity selection
Source: Deka Investment
1 Ongoing charges: Deka-Stiftungen Balance: 1.170 %. The ongoing charges indicated here were incurred during the financial year of the fund ending in February 2015.
The ongoing charges may vary from year to year and do not include costs for buying and selling securities (transaction costs) or any fund performance fees. They do, however, include all costs incurred for investing in other funds, if such costs represent a significant percentage of the fund assets (e.g. for funds of funds). Additional legal information on ongoing charges is provided on page 26.
21
Implementation example: pension fund.
Case example 3: Investment to match
the structure of obligations.
The challenge / initial position.
We prepared a funding concept for the pension liabilities
of a nationwide association with a number of independent regional institutions. One challenge was that
the regional institutions had been managing their
investments in a variety of different ways and the assets
had to legally remain with each regional institution.
Although each institution had formulated different
requirements for managing their cover assets, a concept was developed to combine the investments under
common management and exploit cost and administrative synergies.
22
Method used.
An analysis of the different pension liability structures
was critical for successful implementation of the concept.
In addition to data on individual pension agreements
and employee master data, the actuarial analyses also
took salary and pension trends into account. In addition
to calculating the size of the pension provisions needed,
this also allows a detailed cash flow profile to be
determined for each institution.
The detailed analysis is the most important tool for the
advisors in our corporate fund savings competence
team, who use it to calculate current liquidity needs
and simulate different discounting examples. This creates
a foundation that the investment professionals in
Quantitative Fund Management can use to develop
integrated investment models for funding.
Our concept.
Base portfolio components.
Repositioning.
We recommended a fixed income concept
using a total return approach as a basis
for the combined pension investments
of the public institutions. The priorities
were ranked in the following order:
first capital preservation, then liquidity
and then return. The concept is based
on a conservative benchmark: 1-month
Euribor® plus 100 basis points. Investments are made in EUR fixed income
securities; no equity investments.
Cash
Corporate bonds
Covered bonds
Government bonds
Source: Deka Investment
Priority: capital preservation.
The concept uses a number of different
short-term hedging components aimed
at reducing risk with no lasting reduction
in positive expected returns, as the
total return approach allows a variety of
sources of return to be used in a risk-­
controlled manner without a benchmark
23
Individual support.
Individual customer support is very important to us. Our experts exchange information continuously to ensure an optimal customer relationship all the way from advice
on strategy development and portfolio management to the implementation of clientspecific portfolio requirements.
Denis Friess
Yuxia Chen-Fietkau
Head of Quantitative Institutional
Mandates
Head of Quantitative Portfolio
Management
ƕƕ
ƕƕ
ƕƕ
21 years of investment experience
raduate in business administration
G
and financial analyst
22 years of investment experience
ƕƕ
Graduate in financial mathematics
ƕƕ
At Deka since 1994
At Deka since 1997
The team is responsible for institutional
client support. The investment specialists
are direct contacts for quantitative asset
management products. They are also
available for any questions about funds
and investment strategies.
24
ƕƕ
The team implements previously-specified
target structures for client portfolios.
It chooses the appropriate securities for
the portfolio, sends the orders generated
by portfolio construction to the order
system and works with our central trading
desk to ensure that purchases and sales
are made at the best possible prices.
The unit also checks that investment
restrictions are satisfied. This increases
operational security during implementation of investment decisions.
04
Deka Institutional
Volatile markets –
stable prospects.
Deka Institutional is the Deka Group‘s brand for institutional investors. In addition to our
wide range of institutional and mutual funds, capital market solutions and ETFs, our
strength lies in our service model, which provides custom-tailored solutions for the
entire value chain, from strategy analysis and product design to reporting and
controlling.
Effective integration of asset management and banking.
Our goal is to optimally address the individual needs of
investors – using highly specialised teams that focus
our strengths and expert knowledge for different
investor groups. By combining services and expertise
like portfolio management, fund administration and
capital market competence under one roof, we benefit
from the resources and broad range of products and
research services offered by a large corporate group
that we can use to the advantage of our investors.
Supported by Sparkassen-Finanzgruppe, the largest
financial alliance in Europe, the Deka Group also provides
a solid foundation to the benefit of our investors.
Detailed information:

Facts and figures.
218
105
Our fund business manages
more than 218 billion euros
in assets.
Deka Institutional is
currently in charge of around
105 billion euros in assets
for professional investors.
www.deka-institutional.com
Deka Institutional range of products and services.
Specialist Teams
Product Solutions
Savings Banks
Pensions Plans and Schemes
Insurance
Non-profit Institutions
Public sector
Financial Institutions
Fundamental Approach
Quantitative Approach
Real Estate Concepts
Capital Market Solutions
Lending Solutions
Exchange Traded Funds (ETFs)
Corporates
Family Offices
Services
Advisory Services
Securities Services
Asset Servicing
Alternative Investment Platform (DALI)
Fiduciary Management
Strategic Consulting
Consultant Relations
Source: DekaBank
25
DekaBank.
Outstanding service.
DekaBank consistently receives very good ratings from the leading international rating
agencies. The long-term unguaranteed ratings given by Standard & Poor’s have
recently stood at A, respectively. Investors who value sustainability will be attracted
by the ‘Prime’ status awarded by oekom.
Ratings DekaBank.
Standard & Poor‘s
Moody‘s
Unguaranteed ratings1
Long-term rating
A
Short-term rating
A-1
P-1
AA-
Aaa
AAA
Aaa
Guaranteed ratings2
Long-term rating (guaranteed)
Ratings for public mortgage bonds3
Mortgage bond rating
1 Unguaranteed ratings which the leading international rating agencies Standard & Poor’s and Moody’s have assigned to DekaBank’s liabilities since 19 July 2005. 2 Guaranteed ratings assigned to DekaBank’s liabilities up to 18 July 2001, irrespective of their term - or assigned for the transitional period from 19 July 2001 to 18 July 2005, with a
maximum term expiring on 31 December 2015. 3 Ratings for the public mortgage bonds issued by DekaBank.
Source: S&P, Moody’s
As of 01 / 2016 (Moody‘s), 09 / 2015 (Standard & Poor‘s)
Facts and figures
A
AAA
Long-term
unguaranteed rating
by Standard & Poor’s.
Standard & Poor’s
rating for public
mortgage bonds.
Total expenses as a percentage of average fund assets for a financial year. Ongoing charges include all expenses incurred in connection with fund management, except for
transaction costs and any performance fees. The ongoing charges indicated here apply to the last financial year of the fund concerned. Securities concepts are subject to
fluctuations in value. These fluctuations could lead to losses. This information is no substitute for a meeting with an advisor. The sole binding basis for a purchase of a Deka
investment fund is the key investor information, sales prospectus and reports for the fund, which are available in German from your Sparkasse bank, German state bank
(Landesbank), Deka-Bank Deutsche Girozentrale, 60625 Frankfurt, Germany and at www.deka.de.
26
Contact.
There for you.
Deka Institutionell
DekaBank
Deutsche Girozentrale
Mainzer Landstraße 16
60325 Frankfurt
Phone: (+49) 69 71 47 - 11 17
Fax: (+49) 69 71 47 - 34 84
Postfach 11 05 23
60040 Frankfurt
Germany
www.deka-institutional.com
[email protected]
D 500 000 416 / 500 / m As at: 04/2016
DekaBank
Deutsche Girozentrale
Mainzer Landstraße 16
60325 Frankfurt
Postfach 11 05 23
60040 Frankfurt
Germany