Cyrill Moser
Glossary
With the specially developed evaluation procedure of ZWEI Wealth (the ZWEI method), asset management solutions are classified independently and comprehensively for the first time. To this end, ZWEI Wealth carries out extensive analyses of asset managers and the results they achieve. The data we use is provided either directly by asset managers or by their clientele.
The ZWEI method is based on the four components «provider», «track record», «costs» and «fit». Based on these four components, we individually examine how well asset management solutions and their providers fit to achieve a client's specified investment goals. These four components are explained in detail below. With the help of the ZWEI method, the most suitable asset management solution can be found for each investor.
Provider
The Provider component examines the extent to which an asset manager has the basic requirements for management. This component is based on different factors and develops slowly over time.
How long an asset management company has been in existence, how much money has been entrusted to it, and how many employees are involved says a lot about the robustness and stability of a company. We also attach great importance to the degree of specialization and consider the ownership structure. In addition, we pay attention to whether the necessary banking or administrative licenses exist.
For asset managers who already manage active portfolios through ZWEI Wealth, the average performance figures as well as expert and client assessments are also important.
Track Record
The Track Record component measures how well the performance of the proposed investment solution compares to a passive benchmark and comparable offerings from the market (median). For this purpose, three variables are calculated, which are weighted equally:
- Comparison against benchmark: The results are measured against the passive benchmark we have chosen.
- Comparison against median: The results are measured against comparable offers from the market.
- Consistency: It examines how systematically an investment solution performs better than the benchmark and comparable offerings in the market.
Cost
The total cost of an investment solution is often difficult to grasp and is often challenging for investors to access or understand. Complex cost structures and inadequate disclosure make it untransparent to compare costs. We analyze all cost levels of an investment solution, regardless of whether these costs are incurred by the asset manager directly or by a third-party provider. The total costs are again measured against the benchmark and median. They basically include:
- Custody fees
- Transaction fees
- Management or consultancy fees, including performance-related fees
- Product costs
- Other costs
Fit
The «fit» or «solution fit» measures how well an offer fits the needs of a particular investor. On the one hand, this includes an initial assessment by our experts of how well an offer meets the specifications of a tender and customer needs. On the other hand, the interaction with investors considers their personal preferences.
Besides clearly definable qualitative and quantitative requirements (e.g. size or specialization), soft and thus subjective assessments of investors can also be taken into account (e.g. regional preferences or exclusion of certain segments).
Rating Scale
| 1.00 - 2.69 | Not recommendable |
| 2.70- 2.99 | Satisfactory |
| 3.00 - 3.29 | Recommendable |
| 3.30 - 3.59 | Good |
| 3.60 - 5.00 | Very good |
Risk Profiles
In asset management for private investors, the following risk profiles (also known as standard strategies) are usually used. These standard strategies allow a comparison of returns, risks, and costs within the respective risk profile. The classification of these risk profiles is based on the equity component (excluding alternative investments) of a portfolio.
| Risk Profile | Portfolio Equity Content |
| Fixed Income | 0% |
| Income | ca. 10% |
| Yield | ca. 25% |
| Balanced | ca. 45% |
| Growth | ca. 65% |
| Equity | ca. 90% |
Comparables
Two comparables are used to assess the performance of financial service providers: passive benchmarks and comparable offers from the market (median). ZWEI Wealth uses different comparables depending on the objective:
| Benchmark |
A passive comparison portfolio that consists of passive investments that are as easy to invest as possible, such as exchange-traded funds (ETFs) or index funds and is replicated with the corresponding cost structure. Only when investors can use the performance of the simplest alternative for comparison will a real performance comparison with their portfolios be made possible. |
| Median | The median of all comparable offers from the market that match the risk profile of the portfolio being compared. |
Other Terms
ZWEI Wealth also uses other established terms and methods in its analyses, which include the following:
| Return | In the asset management industry, the return of a portfolio is preferably calculated time-weighted (TWR), or alternatively money-weighted (MWR). ZWEI Wealth generally prefers the time-weighted return. As is customary in the industry - and requested by ZWEI Wealth - the gross return is used for all comparisons, which includes transaction costs. |
| Strategic Asset Allocation | Strategic asset allocation (SAA) describes the subdivision of assets within an investment strategy into the various asset classes (for example, cash, bonds, equities, real estate, alternative investments). The subdivision can be made based on risk capacity and risk appetite, the economic environment, the weighting of the individual markets in the global market, mathematical models, and individual needs and restrictions. |
| Custody Fees | The costs of holding and managing investments in the securities custody account. In addition to the actual securities accounting, this also includes regular reporting on changes in value and returns, as well as tax reporting. There are custody account management models which, in addition to the actual custody account fees, also charge transaction fees in the form of an all-in custody account fee. |
| Transaction Fees | The fees and charges arising from trading in securities in the securities account. These include brokerage fees, stock exchange trading fees, margins (bid-ask spread) on securities, exchange rate premiums and margins on foreign currency bills, and non-refundable taxes such as stamp duties. Withholding taxes, for example, are not transaction costs because they can be recovered through an ordinary tax assessment. Some of the transaction cost components are not measurable or are very difficult to measure. |
| Management Fees | All fees for the management and portfolio advice charged by an asset manager. This also includes the costs of performance-based remuneration models. |
| Product Costs | All explicit and implicit charges and fees incurred within investment instruments such as investment funds (including exchange-traded funds) or structured products. Product costs are charged directly to the investment instrument and may include additional custody fees, transaction fees, management fees and other costs charged to investors. Product costs also include all costs that arise in nested product structures (funds that contain other funds). The performance of an investment instrument is reduced accordingly by such ongoing product costs. |
| Other Costs | Other fees include all costs that are not covered by one of the preceding cost components. These include, but are not limited to, interest charges, including negative interest, on loans and overdrafts and credit balances, margins on interest, shipping charges, or costs for individual special reporting. |
| All-in Fee | The all-in fee is a fee model in which fees and charges are combined and charged in a lump sum to suggest an easy-to-understand model. The all-in fee is typically offered as a percentage of assets or as a lump sum. It should be noted that even an all-in fee often does not include all costs, is not standardized, and consequently should be interpreted with great caution. |
