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Who owns the German DAX? [pdf] (dirk.org)
53 points by doener 38 days ago | hide | past | favorite | 50 comments

DAX30 is just way to small.

In September the number of companies will be increased to 40. But even then, when you compare it to popular US indices like to SP500 or even NASDAQ100 you can already see by the number of companies, that it is still tiny. The market cap of DAX30 is roughly 1 trillion $, while the SP500 has about 35 trillion $ in it.

In my mind if you want to invest into Germany, you could buy HDAX, which also includes MDAX and TECDAX and at least consists of about 100 companies. Unfortunately it is not at all popular.

Germany just has very little publicly traded capital, partly because of the privatly owned Mittelstand, sometimes resulting big corporations like Freudenberg, Bosch and others still being owned by a family or a foundation. Both of them would easily be included in the DAX.

The other problem of course is totally missing out on the whole IT thing.

It's not just the Mittelstand. It's also that Germany doesn't have financial markets as sophisticated as those in New York, London or Tokyo, so the DAX doesn't have companies whose centre of gravity is outside Germany in the same way.

As an aside, "sophisticated" sounds like an applause word which is not intended: I think overall the benefits outweigh the harms for Germany to have its business decisions made more by industrialists than financiers.

Where you say “sophisticated”, I might say corrupt and likely criminal.

Not all activities in the financial sector are destructive, but the sector as a whole has a tendency to reward destructive activity.

You might like Michael Hudson's comment: "when left-wingers–or people who call themselves left-wingers, they’re really not left-wingers at all; they’re, I don’t know what, post-left–very few people who call themselves left-wingers distinguish between industrial capitalism and finance capitalism."


Businesses like Lidl+Kaufland, BMW and others are just innocent family businesses. Nothing to look at here, folks.

None of them are remotely in a monopolistic position in their different businesses.

Schwarz group, the 4th largest retailer on the planet Earth, received public funding for their expansion in eastern Europe. I'm receving Lidl/Kaufland weekly paper leaflets at my doorstep anywhere I live in Germany or Poland, to be ecologically guilt tripped by various marketing materials on visiting their venues. Innocent family business, I said.

I did not know their absolutely massive expansion eastward was fueled with public money.

They're not true monopolies but it's close enough in many respects

Illuminating. Thanks. Modern day slavery it is

Thanks for the information. I am curious, what is your comment on BMW?

And yet the German auto market is a particularly rigid oligopoly regardless, dominated by their domestic auto giants.

BMW, Daimler, VW all stuffed into one $4.3t economy. It'd be like if GM and Ford were ten times larger than they are in relation to the size of the US economy.

Scaled up to the US economy in size, those three would be up around $3 trillion in sales (five to six times the size of Walmart).

So they're co-monopolies, towering over the German economy, sharing it all with one or two other giant German companies. I suppose that's nice of them, sharing is caring.

The car companies are publicly traded. OP was talking about giant family owned corporations. You should watch out for Schwarz especially. Walmart tried to enter the German market and failed. Lidl/Aldi are expanding everywhere. I would say they are the only example where the German efficiency stereotype is actually true.

> The car companies are publicly traded

well kinda. bmw basically is owned to 46% by two people and they control it. vw the same, most voting stock is in the hands Porsche Automobil Holding SE, basically owned by wolfang porsche, his ancestor was ferdinand porsche.

yeah on paper they are traded. but not controlled. (mercedes is different here) but a lot corporations in germany are at least still controlled by descendants

since when do you need a "monopolistic position" to be a good investment?

Too small for what purpose?

Also, the US' GNP is about 5 time that of Germany. If the NASDAQ100 is "big enough", the DAX should be big enough as well.

It is too small to come up with a reason to buy a DAX ETF for most people.

To stick to the GNP you mentioned: Let's say you want to own the whole world economy or you are European/German and want to own part of your own local economy. You buy something like an MSCI World (66% US) and now want to increase the miniscule percentage Germany has in them (<3%) to account for the GNP being 5 times smaller, not 22 times like the market cap suggest. Do you now want to do that by buying only 30 companies on top of the ~1600 companies inside the MSCI World? That would be extremly heavy bets on those companies. So something like a Europe STOXX 600 is much more useful for that purpose.

DAX30 is an extremly narrow set of companies, which do not have much in comman, except that they are based in Germany. Even if you wanted to bet only on their "Germanness" for whatever strange reason, why would you buy only 30 companies?

NASDAQ100 is not "big enough". You do not buy it because of its size, you buy it, because you want to bet on tech. It just happens to still be 15 times bigger than DAX30.

Except that DAX and EuroStoxx 600 are so correlated that it doesn't quite matter.

People buy local indices because the are easier to grasp and reported on in the news daily. Other national indices rarely are.

Diversification via stock ETFs is just 5 buckets: World, US, US Tech, emerging markets, Europe.

> Except that DAX and EuroStoxx 600 are so correlated that it doesn't quite matter.

That is actually an argument for the bigger index, not the smaller.

Interesting! I stumbled across the following part:

The report states "German investors continue their divestment from the DAX [...] DWS Investment was the biggest domestic seller, followed by BlackRock Asset Management (Deutschland)" and "North American investment continued to grow [...] mainly driven by Vanguard".

If a German citizen sells a BlackRock ETF and switches to Vanguard (e.g. due to lower TER), would that reflect in the report as "German divestment from the DAX"?

Why would Germans want to buy foreign ETFs and why would foreign providers not want to create a domestic ETF for Germans? Trading € to $ and back isn't very logical.

While currency hedging is cheap in a 0% rate world, hedged ETFs tend to have higher fees. Paying ~0.5% on forex on both ends is better than paying 0.25%/year more over long holding periods. There's also much less choice when it comes to hedged ETFs.

The other thing is, you want to diversify geographically to protect you against weakness in your home economy, and when that happens the strength of your home currency tends to fall off. Hedging your currency risk is exactly what you don't want in that scenario.

It's been done in parts, for example Blackrock has both DE000A0F5UF5 and IE00B53SZB19 on the NASDAQ100, but after looking at liquidity/volume and performance data, few of the special-made DE ETF actually make significant sense to buy.

No. The ETF holdings are masked behind the provider of the ETF. SO in your case, the holdings remain unchanged.

Anyone know why there are so few investors from Asia? Asian-based investors make up 4% of the DAX and at least 3.5% of that is sovereign wealth funds. For context Norway’s SWF alone holds more than 4% of the DAX.

Vanguard and Blackrock ETFs are the cheapest on the German market. Germans like the Vanguard FTSE All-world index fund.

While Vanguard and Blackrock own a big chunk of the DAX, what this presentation does not show is for whom do Vanguard, Blackrock, et. al manage these assets for?

Is this just Germans buying American products that require American investors to buy German stocks?

> Vanguard and Blackrock ETFs are the cheapest on the German market.

Lyxor is often cheaper. By Lyxor buying Comstage and Amundi buying Lyxor, there is a big European champion now.

Besides size and volatily (dissolution, mergers of ETF generating unfavourable tax events), most ETF by European providers are swap-based. This means that they are cheaper/slightly better performing according to their swap risk premium, but some folks they like to stick with non-swap ETF. Finally, age --- Blackrock, Invesco etc have some of the largest and oldest ETF in the Euroepan/German market on some of the most desireable indices, and so it comes that people might not think of collecting 10 ETF on the same index but stick with one, esp. since for tax optimisation, FIFO purchase/sell order can be circumvented by collecting the same security in distinct depots.

> Besides size and volatily (dissolution, mergers of ETF generating unfavourable tax events), most ETF by European providers are swap-based.

The older ones are swap-based, the new ones are not. iShares has the biggest offering. Lyxor and Xtrackers are often cheaper for very popular indices. Vanguard is just entering the market.

I think it is a very healthy competition and TERs are constantly going down.

While it's true that a lot of ETFs available in Europe are swap-based, I think it's not "most". According to [1], there are 798 ETFs using full replication, 510 using sampling and 327 are swap-based.

[1] https://www.justetf.com/de-en/find-etf.html?groupField=none&...

Germany has a trade surplus with the US so Germans would end up buying American stocks.

Germany doesn't have a trade surplus with the US. That's the myth US government spreads regularly to justify protectionism.

The surplus exists only because the biggest digital companies (Google, MS, IBM, FB, ...) are not counted for in the USA-German trade balance.

There was a $67 billion trade gap, $60b to $127b, between the US and Germany for 2019.

The biggest US digital/tech companies aren't remotely coming close to having enough unaccounted for business in Germany that could fill in $67 billion.

> surplus exists only because the biggest digital companies (Google, MS, IBM, FB, ...) are not counted for in the USA-German trade balance

Do these transactions result in uncounted dollars flowing back to the U.S.?

> Do these transactions result in uncounted dollars flowing back to the U.S.?

Yes, but not directly. Unless you count that all those profits are actually trade surplus with Ireland, Luxembourg and other tax heavens, and not with Germany, France and other countries where those "digital goods and services" are sold.

well isn't most money these internet companies do, put into offshore markets, so neither positive for the us and the eu?

Why is that?

Could someone please explain page 11 (Top 15 DAX Investors)? It lists four different entries for BlackRock, what is their strategy behind it?

Blackrock has thousands of funds, hedge funds, ETNs, subsidiaries resulting from acquisitions which have their own funds. It still matters that they are all under the control of Blackrock and this single entity may drive decisions at the board level through their different vehicles.

They basically own 10% of the DAX. Which is a massive concentration of power over german companies (and it must be similar in other countries).

To the point that if I was a regulator I would question whether it is ok to have a single entity (and the likes of Blackrock) have that much control over the country's corporate landscape.

It looks like they differ based on geographical location and how they are regulated. Two in Germany, two in the UK. Two are asset management companies, two are advisers.

Press release and information about what this actually is rather than direct PDF link:





same organizations, different union

The big investment managers really don't own anything as the assets are not really theirs. They might exercise voting power etc., but really comes down to the preferences of the actual investors/asset owners. There might be a case that most investors/asset owners don't care enough about what ownership means, though.

(SWFs are a different animal)

I wonder how much pissed off are they on Wirecard, or is it a drop in the ocean for them...

Wirecard was more of a problem for many small bag-holders who wanted to invest in what was called "Germany's sole modern IT company".

People sank their entire life savings into that shit.

FOMO can be very expensive. Every generation pays its own education fees in the market. Previous generation had the dotcom bubble, before that there was Black Monday in 1987, the 1973 oil crisis shock, etc etc all the way back to at least the 1600s.

Interestingly enough, the Norway SWF did dodge Wirecard. The new CEO is a former hedge-fund guy. He was named March 2020, but did not start until September 2020. There's not enough context for me to think it attributable to any change in leadership, but he did bring it up as an example of how they could benefit from looking for more things to not invest in. Whatever segment of their portfolio this is, is otherwise pretty broadly diversified.


Heh, the rich always know when to pull out. The poor remain with liabilities.

Wirecard ... anyone really understood the story behind it?

I just skimmed through the wiki page and well

Involved are: members of austrian secret service, russian secret service, german politicians on highest level, german biggest media empire(Axel Springer) ... and one of the villains is now supposed to be in russia?

I think there are many pieces missing in the puzzle.

Many politicians and regulators have ensured cozy obnoxiously paid executive and advisor contracts on this affair. Not counting the 1.9 billions EUR missing, but that's probably already parked somewhere in real estate. It's like Panama Papers - a solid scandal... locked in a concrete basement.

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