The Most Popular Funds in Germany

German investors invested EUR 160 billion in investment funds last year. Investments in funds are particularly suitable for investors who want to build up their assets over the long term.

What are the most popular funds in Germany? There is a wide range of funds. First of all, we must clarify what investment funds generally exist and what distinguishes them. We provide a brief overview of the different types of funds in this article.

Investment Funds

An investment fund is a fund managed by an investment company, which is invested in shares, bonds, real estate, commodities, or derivatives. A distinction is made between open and closed-end funds. These investment funds are managed by professional asset managers.

Equity Funds

Equity funds are investment funds that primarily invest in equities. The capital is often invested in domestic and foreign company shares. Due to the fund's respective risk diversification, investing in equity funds involves smaller risks than buying shares individually.

A total of EUR 14 billion were invested in equity funds last year. Most of the money flowed into passive, exchange-traded index funds (ETFs). ETFs are considered an economical alternative to actively managed investment funds.

Equity funds should only be used as a supplement when investing because these investments are associated with a higher risk due to price fluctuations. Worldwide, people also frequently invest in funds with equities from emerging markets. These are riskier than funds that invest only in equities from industrialized countries.

Bond Funds

Bond funds, also known as retirement funds, are investment funds that invest in fixed-income securities such as government and corporate bonds. Bond funds are subject to significantly lower fluctuations in value than equity funds. In the long term, therefore, they are regarded as a lower-risk investment compared to equity funds. Bond funds can be suitable for stabilizing your own portfolio.

Mixed Funds

Mixed funds are investment funds that invest in several asset classes, such as equities, bonds, commodities and real estate concurrently. This investment strategy allows the funds to flexibly vary the focus within the two investment forms.

This reduces the risk for investors of these funds somewhat. This flexibility also allows investors to benefit from the stock market with their investments.

Real Estate Funds

Real estate funds invest the investors' accumulated capital in real estate. Here, too, there are open and closed-end real estate funds. Real estate funds differ in the form of real estate they invest in (commercial or privately used real estate) and the real estate market they invest in (e.g. real estate in Great Britain or Germany).

In 2017, EUR 2.3 billion were invested in open-ended German real estate funds. Investments in the United Kingdom amounted to 1.7 billion and to 1.3 billion in the United States.

Special Funds

Special funds are investment funds that are not open to the general public. These funds are specifically intended for institutional investors, including pension funds and insurance companies. In 2017, EUR 88.1 billion were invested in special funds.

A FAS study at the beginning of the year published a ranking of Germany's most popular funds in 2017. Private investors prefer to invest their money in mixed funds. These investment funds dominated in 2017 at EUR 29.5 billion. Bond funds were the next most popular investment, collecting a solid EUR 20 billion last year.

The 6 most popular funds in Germany

Pimco Income Fund

The Pimco Income Fund, managed by the US fund company Pacific Investment Management Company LLC, is a subsidiary of Allianz SE. It is the largest actively managed bond fund in the world. This investment fund is worth EUR 58 billion.

This bond fund invests primarily in corporate bonds and only rarely in secure government bonds from Germany or the USA. Instead, some of the money flows into financial products that have had a bad reputation since the financial crisis in 2008: Mortgage-backed securities.

However, because the US real estate market developed well last year, the Pimco Income Fund was also able to generate good returns for its investors. The performance was 4 percent in 2017. Investors are attracted to these funds because of the possibility of regular distributions, i.e. an "income." However, these are not guaranteed.

M&G Optimal Income Fund

The English fund company M&G International Investments Ltd is the originator of the M&G Optimal Income Fund. This fund by manager Richard Woolnough only invests in bonds, especially corporate bonds. It invests particularly in bonds with shorter maturities. Its performance was 4.3 percent in 2017 and the fund remained relatively stable at 3.9 percent over five years.

Carmignac Patrimoine

The Carmignac Patrimoine fund is regarded as the model fund of the French asset manager Edouard Carmignac. Here, all purchases of shares and bonds are hedged by purchasing special securities. Carmignac Patrimoine focuses on international bonds, equities and currencies worldwide.

The fund manager has earned an excellent reputation in the financial sector because he survived the 2008 financial crisis without losses. The Frenchman still draws on this reputation. The Carmignac Patrimoine Fund manages more than EUR 20 billion. However, the past year was devastating for the French fund. Over the year as a whole, the Carmignac Patrimoine recorded a performance of only 0.1 percent - with comparatively high fees for investors.

DWS Top Dividende

The DWS Top Dividende Fonds is an equity-only fund. It is managed by Deutsche Asset Management Investment GmbH, a fund company owned by Deutsche Bank. For twelve years Thomas Schüssler has managed the DWS Top Dividend Fund, which is worth a total of EUR 19.5 billion. Last year, this DWS fund made only 0.6 percent profit. However, this equity fund is likely to be successful in the long term. Over a five-year period, the fund is among the top performers, increasing in value by 10 percent per year. Investments in this fund attract with higher return opportunities and regular distributions.

In recent years, the DWS Top Dividende has lived up to its name. DSW achieved high dividends, i.e. profits paid out to shareholders, and an attractive increase in value. Equity funds present a significantly higher risk than bond funds, but this makes it possible to achieve the high dividends of DWS.

Nordea Stable Return

The Nordea Stable Return fund is managed by the Swedish financial group Nordea. This mixed fund has a special strategy in that it buys shares and bonds whose prices should develop as independently of each other as possible. Investors thus receive little profit; however, they can expect fewer losses. Its performance was 2.6 percent. Over 5 years, the value of the Nordea Stable Fund increased by 5.1 percent. Its assets alone are estimated at EUR 20 billion.

However, this fund has not taken any more money from new investors for a few years.

DWS Deutschland

Deutsche Asset Management's main fund is DWS Germany. DWS Germany is the most successful fund in this list. This equity fund only buys shares in German companies, from the DAX and from the M- and S-Dax.

The DWS Deutschland fund developed positively under the leadership of fund manager Tim Albrecht. He currently manages EUR 6.84 billion in the fund.

DWS had suffered setbacks in recent years but is expected to be successful in the long term. The performance in 2017 was 18.9 percent. Over the last 5 years, the value of the fund has risen by 15 percent. According to the FAS, there is currently "hardly a better German equity fund" than DWS Germany.

Germans prefer security - also when it comes to their investments. The figures of this study prove this. German investors prefer bond funds or mixed funds for their investments, which generally promise more security. These fund types dominate the ranking of the most popular funds in Germany. Nevertheless, according to this FAS study, cautious funds did not bring in much money as an investment. Equity funds and ETFs achieved the highest returns.

Which funds do you invest in? Is your preferred fund included in this ranking? Let us know in the comments below!