With a managed portfolio in quirion's global ETF portfolio, you now also have the option of pursuing a pure bond strategy. Here's what makes our bond portfolio special.
Attractive interest rates are back at last — and this has been a major investment theme for a while now. For the time being, it stays that way, even though there is already speculation about rate cuts. In any case, interest in investments that let you benefit from the interest-rate environment remains very high. „We see this, for example, in the demand for our interest account and for Cash-Invest, our alternative to overnight money,“ notes Philipp Dobbert, Head of Asset Management at Quirin Privatbank and at quirion.
These offerings are aimed at anyone who wants to invest capital for the short term. The interest account currently pays 3 percent annual interest, and the variable target return of Cash-Invest is currently 4.10 percent per year1. Cash-Invest invests in money-market ETFs with short residual maturities.
Strong interest in bond ETFs
Since the turn in interest rates, however, investors have also shown heightened interest in the bond market. Inflows into European bond ETFs reached €57.2 billion in 2023. Compared with the previous year, that is an increase of 72 percent.
Bond ETFs have always played an important role at quirion: „We blend them into the global portfolio depending on your individual risk profile,“ Dobbert explains. „Because this is how the price fluctuations of a portfolio can be cushioned.“ Until now, however, the bond share was capped at 90 percent. „What's new is that we now offer a bond allocation of 100 percent on request for a managed portfolio in the global ETF portfolio.“ This strategy is for those who want to avoid the fluctuations of the stock market entirely.
A bond portfolio that brings stability
Bonds are subject to price fluctuations too. Their return potential and risks depend above all on two factors: their credit quality and their maturity. The lower the credit ratings and the longer the maturities of the bonds in an ETF, the higher the expectations for return and risk tend to be. For both, it also matters in which currency the ETF's bonds were issued: if you invest in dollar bonds from Europe, you lose out on returns when the dollar falls.
The now broad range of bond ETFs on the market enables quirion's investment professionals to steer the balance of return potential and risks in the bond portfolio precisely, through selection and weighting. More than 80 percent of the bonds carry an „investment grade“ rating (rating grades „AAA“ to „BBB-“). The average duration of capital commitment, known as the duration, is around 3 years. That is comparatively short for a bond portfolio. The focus here is on government bonds from euro-zone countries. For bonds outside the euro area, Dobbert and his team rely on currency-hedged ETF variants.
A share of equities boosts return potential
Exactly who the pure bond strategy is suited to depends on your personal appetite for risk. With a few simple questions, quirion determines your risk profile during the application process. And on that basis, it makes a suitable proposal for the mix of equities and bonds.
„For investing in the global ETF portfolio, we continue to recommend adding at least 10 percent equities,“ Dobbert emphasizes. But anyone who would rather forgo equities entirely can now also opt for the pure bond strategy. „You should keep in mind, though, that even a small share of equities can significantly increase your return potential.“
Find out more about the global ETF portfolio here.
1 The target return is variable and depends on market developments. As of 31 January 2024, the weighted yield to maturity of the financial instruments in the portfolio was 4.10% p.a. Past performance is not a reliable indicator of future results.
