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This is how wealth accumulation works: Digital investment: How robo-advisors control wealth accumulation | message


by Andreas Hohenadl, Euro am Sonntag

Benjamin Franklin is not only considered one of the founding fathers of the United States, he was also a scientist and inventor. Would he have liked the fact that his portrait is now on the US $ 100 bill? He would definitely be enthusiastic about the progress that they have made digitalization bestowed on humanity.

The topic of financial investments has long been a part of the modern cosmos of zeros and ones. For several years now, private investors have been able to have their capital managed by so-called robo-advisors.

The driving force behind the development of these digital asset managers was – Franklin sends his regards – the USA. Providers such as Wealthfront and Betterment were launched in 2008. Today, the robo-advisors on the other side of the Atlantic manage by far the largest fixed assets: the equivalent of more than 600 billion euros.

In contrast, the amount that savers in Germany have parked with the digital investment helpers is comparatively modest. In their market study, which was published for the second time in 2020, the experts from the analysis company FondsConsult estimate it to be around five billion euros. For about five or six years now, robo-advisors have also been gaining a foothold in the German market. Their goal is to enable digitally savvy private investors to easily set up and manage a portfolio. Since the Robos often use inexpensive index funds, the ETFs, they can offer their services more cheaply than their established rivals.

However, the industry is still very young and in many cases the players still have to prove that they can achieve good investment results over the long term. Basically, they pursue two different approaches to asset management, which are described in more detail below.

VPhilipp Dobbert doesn’t like to talk about a passive approach. Because activity is generally considered good, passivity is considered bad. The chief economist at Quirion prefers to use the term “prognosis-free”. This is how the customer accounts are managed by the Berlin robo-advisor: “Nobody can predict the future,” says Dobbert. “Therefore, in our opinion, there is no point in tactically raising or lowering investment ratios based on any forecasts.”

The digital offshoot of Quirin Privatbank definitely does not believe in the predictability of the future of the stock market. But all the more to capital market research. And it shows very consistently: “In the long run, forecast-driven managers always fail to achieve a higher return than the broad market or to generate its return with a lower risk,” explains Dobbert. The company’s credo is: “Active management is flawed and not worthwhile.”

The fact that active fund managers sometimes beat their benchmark indices does not change this conviction. “What was Carmignac yesterday is Flossbach today,” said Dobbert. Statistically, such success stories are indistinguishable from chance. The private investor should rather rely on a forecast-free approach for long-term asset accumulation. “The Quirion customer decides once on a certain investment division that corresponds to his risk appetite, and this division is then maintained.” The rebalancing of the depot plays an important role. The original weighting of the asset classes in the portfolio is restored at least once a year. If there are deviations of more than ten percent in the fixed quotas, they are balanced out beforehand.

A special feature of the robo-advisor is that so-called factor premiums are to be collected with corresponding ETFs: Above all, value and size are used. Specifically, this means a focus on undervalued companies and small caps. “Historically, these factors deliver excess returns, even if value values ​​have lagged significantly in recent years,” says Dobbert. “But the value premium is not dead,” he is convinced.

Large spread with minimum investment

The digital asset manager from Quirin Privatbank came onto the market in 2013 and is now the market leader in passive or forecast-free robots in terms of assets under management. But of course there are now other competitors in this area. The five largest providers with the most important key data are summarized in the table below. In terms of assets under management, the editors used the estimates of the annual robo-advisor study by FondsConsult. There are clear differences in the field of providers, especially with regard to the minimum investment amounts. They range from 500 euros at Growney and WeltInvest to 100,000 euros at Liquid, which is backed by the Quandt family’s family office.

A.At the beginning of the conversation with Salome Preiswerk there is a clarification of terms. “We are active, but not actionist,” says the founder and CEO of Whitebox. The Freiburg robo-advisor has been on the market since the beginning of 2016 and is therefore already one of the more experienced providers. And as representatives from the passive robo camp emphasize that their approach has nothing to do with inactivity, Whitebox should not give the impression of hyperactivity.

“We take a value-based approach to the construction of depots for our customers,” says Preiswerk. The most promising would be selected from over 300 asset classes, regions and sectors. Promising means that by investing in assets that are undervalued and waiting for them to return to their fair value, Whitebox aims to generate higher returns.

That’s one part of portfolio management. The other is to make the depot robust so that it can withstand many market situations. “We always model the risk on a long-term basis,” explains Preiswerk. “In doing so, we primarily consider the so-called tail risks, events with a low probability of occurrence but high damage potential.” This is done using a mean CVaR approach (see glossary explanation below) as well as scenario and stress tests.

The Whitebox founder emphasizes one point in particular: “We do not operate volatility management.” Because price fluctuations are not something fundamentally negative. “And in the long term, the attempt to smooth out the volatility costs a considerable amount of return.” For example, the upswing is often missed after a downswing.

“Risk management must always be congruent with the investment horizon,” says Preiswerk. Many market participants would not heed this rule. “Everyone agrees that investments should be medium to long-term. But the risks often cannot be managed in the short term.” The whitebox customers’ depots are only intervened if the long-term risk-opportunity structure changes.

Established banks are also involved

With its scientifically based approach, the robo-advisor from southwest Germany is currently one of the five largest providers in the active category. The table below shows the heavyweights. This list is also based on the estimates of the investment volume by FondsConsult.

There are two robo-advisors in the group who can be assigned to banks. The main shareholder in Cominvest is Commerzbank; The majority of the inflow of funds comes from the direct bank branch Comdirect. And with Robin, Germany’s largest financial institution, Deutsche Bank, has also been operating a digital investment manager since 2017.

The undisputed growth leader and market leader, however, is the Munich start-up Scalable Capital, which has been active since 2016. There, the portfolios have been fully committed to systematic risk management, which takes place on a very short-term basis – in contrast to whitebox.


CVaR: The abbreviation stands for Conditional Value-at-Risk, a further development of the classic risk indicator value-at-risk (see also VaR model portfolio). In addition to the probability of large price deviations, the CVaR also takes into account the amount of possible losses. Robo-advisors such as Whitebox use the CVaR for portfolio optimization.

ETC: Abbreviation for Exchange Traded Commodity, in German exchange traded commodity. ETCs offer the opportunity, for example, to benefit from a rise in precious metal prices. The Xetra Gold product is one of the most popular ETCs in this country.

ETF: Abbreviation for the English term Exchange Traded Fund, in German exchange-traded fund. These financial products are also called passive funds. As a rule, they follow a stock market index such as the DAX in a one-to-one ratio and have significantly lower fees than active funds.

Factor premium: Characteristic of a security that is statistically identifiable as a driver of return and risk. The best-known factor premiums, which tend to promise higher returns, are small size (small stock corporations) and value (favorably valued companies, so-called value stocks).

Fintech: Compound word from the terms “financial services” and “technology”. Fintechs are companies that want to simplify and change conventional banking services through technology. Banks also set up their own fintechs or buy / participate in start-ups.

Rebalancing: Resetting a depot to its original constellation. An important means of maintaining a portfolio so that the investment strategy (defensive, moderate, offensive) still matches your personal investment plan even after many years. Most robo-advisors rebalance their clients’ portfolios on a regular basis or when certain quotas are deviated from.

Volatility: Fluctuation range of a security investment and often used as a measure of the investment risk.



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Image sources: Ociacia /, Finanz Verlag, Finanz Verlag

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