Vive's investment team carefully evaluates our investment funds annually and monitors the product offering on the financial markets.
This is how we ensure that our clients' investment plans remain optimal.
This year, we have identified some better alternatives for our current investment funds within three of our investment categories:
Below, we explain per category why the switch to the new investment fund is an improvement to our clients' investment plans and what this means for you as a client.
The new fund in the Euro Money Market Investments category is the “DWS ESG Euro Money Market Fund”. Euro Money Market Investments is the least volatile category in our model.
Money market funds invest in short-term and safe bonds to offer stable returns with minimal risks. Because money market funds only invest in short-term bonds, they are very liquid. This means investors can withdraw their money quickly and easily from the fund when needed.
The new fund has lower costs, making the switch more advantageous. Both funds, incidentally, have no sales or purchase costs, so the switch also costs no money. We have calculated that an investment of €1,000 in the new fund will result in a saving of €7.44 over a 5-year period. This may seem a minimal amount, but on a large scale and over time, it can have a greater effect than you might expect.
The new fund in the Euro Government Bonds investment category is the “Vanguard Euro Government Bond Index Fund”. Government bonds are loans you give to the government. In return, the government pays you regular interest, and at the end of the term, you get the borrowed amount back.
Our government bond funds contain loans from European governments in the Eurozone with good creditworthiness ('investment grade'). It is a safe way to invest money because these European governments are reliable in repaying their loans.
The new fund has a longer duration than the current government bond fund. This means the new fund holds loans that, on average, have a longer term. Because these loans are fixed for longer, the fund is more sensitive to changes in interest rates. If interest rates rise or fall, this has a greater impact on the value of the new fund. This is also called interest rate risk. Our analysis has shown that investing in a government bond fund with a longer duration ensures better diversification for portfolios in our model. The new fund also has less concentration in countries with relatively higher risk, such as France and Italy.
In addition, the fund has lower costs. We have calculated that an investment of €1,000 in the new fund will result in a saving of €5.00 over a 5-year period. This assumes the selling costs of the old fund. The new fund has no purchase costs.
The new fund in the Inflation-Linked Euro Government Bonds investment category is the “Vanguard Eurozone Inflation-Linked Bond Index Fund”.
Vive clients whose retirement age is approaching will gradually switch to inflation-linked government bonds in their pension plan. These are government loans where the value grows with inflation. This means that if prices rise (inflation), the interest and the amount you get back also go up. This is how these bonds protect your accrued pension from inflation.
The new fund has better diversification across European countries. It invests in bonds from more different European countries. The new fund, like the old fund, has the condition that the governments must be creditworthy ('investment grade') and it only contains bonds from countries in the Eurozone. By diversifying the investments across more countries, we spread the risk. At Vive, we consider risk diversification and risk management important.
In addition, the new fund has lower costs than the current fund. We have calculated that an investment of €1,000 in the new fund will result in a saving of €2.25 over a 5-year period. This assumes the selling costs of the old fund. The new fund has no purchase costs. For most clients, the ultimate saving will be even higher, as they are not yet investing in inflation-linked government bonds and therefore do not incur selling costs now.
The fund switch ensures an improvement to Vive's portfolios. The government bond fund fits better into our model due to the fund's higher duration. The inflation-linked government bond fund has better risk diversification. Additionally, these funds, like the new money market investment fund, have lower costs.
With these changes, we ensure that your investment plan is better positioned for the future.
Yours sincerely,The Vive Investment Team