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11 Feb 2019

The MDAX – now with added tech!

If German heavyweights flounder, DAX hits the depths 

Is the German powerhouse really all it’s cracked up to be? Long seen as a leader in manufacturing, technology and design, some feel the country is looking a touch old fashioned. Indeed, its blue-chip DAX benchmark has a considerable skew towards automobiles and parts, and insurance companies. At just 30 stocks, the DAX is also quite concentrated – the top 5 stocks alone represent over 40% of the index.1

This leads to problems when individual companies struggle. Consider for example Deutsche Bank’s reported troubles, Siemens and Volkswagen’s respective bribery and emissions scandals, or engineering and steel conglomerate ThyssenKrupp’s restructuring. Dependency on coal and nuclear has been a headwind for E.ON and RWE as they struggle to catch up to energy sources of the future. The large size of these German giants can act as deadweight, as they are simply too big to fall out of the index.

Accordingly, the DAX has not been kind to investors. It finished 2018 down by 18.1%, the worst performance amongst developed European countries. In fact, its current level is below its 2015 peak.1 Could the newly shaken up MDAX be the solution? 

Revamping the MDAX

Index provider STOXX announced in September last year some important revamps to their DAX family of benchmarks. Notably, the MDAX mid cap index now includes tech stocks, effectively making it a broad-market index. Its number of constituents was also increased from 50 to 60. The MDAX might now be a truer representation of the German economy, given it offers exposure to a wide variety of sectors. It also holds twice as many stocks as the DAX, with the top 5 accounting for just over 25% of the benchmark.

Sector breakdown – MDAX vs. DAX2

Chart 1

Contrary to popular belief, volatility-wise this mid-cap route was less bumpy than the DAX in 2018.1 Many of the MDAX members are leaders in their respective business areas, including cable specialist Leoni, chemical distributor Brenntag, and kitchen specialist Rational. It’s also a more dynamic index. If a constituent flounders, it’s out. Thriving companies on the other hand are more likely to stay, and may even graduate to the DAX.

Furthermore, the MDAX could partially mitigate the threat posed by potential US trade tariffs as it generates significantly less revenue from over the pond than the DAX does. Finally, cyclicals account for over 80% of the MDAX, so if you’re feeling particularly confident in eurozone recovery, it may be a benchmark to consider. 

Why Lyxor for German mid-caps?

  • Accomplished. Our MDAX ETF was the best performer of its kind in 2018.3
  • Cheapest. With a TER of 0.20%, ours is the lowest cost MDAX ETF on the market.3
  • Dependable. Launched in 2014, our fund has over 4.5 years of track record.3

Find out more about the Lyxor German Mid-Cap MDAX UCITS ETF


This article is for informative purposes only, and should not be taken as investment advice. Lyxor ETF does not in any way endorse or promote the companies mentioned in this article. Capital at risk. Please read our Risk Warning below.

1Source: Thomson Reuters Datastream, Lyxor International Asset Management, data as at 31/12/2018. Performance is based on total returns, in EUR. Past performance is not a reliable indicator of future results.
2Chart source: Lyxor International Asset Management. Data as at 31/12/2018. For illustrative purposes only.
3Source: Lyxor International Asset Management, Bloomberg. Data as at 31/12/2018. Statements about Lyxor’s credentials vs. peers refer to the European UCITS ETF market only. Past performance is not a reliable indicator of future results.

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This research contains the views, opinions and recommendations of Lyxor International Asset Management (“LIAM”) Cross Asset and ETF research analysts and/or strategists. To the extent that this research contains trade ideas based on macro views of economic market conditions or relative value, it may differ from the fundamental Cross Asset and ETF Research opinions and recommendations contained in Cross Asset and ETF Research sector or company research reports and from the views and opinions of other departments of LIAM and its affiliates. Lyxor Cross Asset and ETF research analysts and/or strategists routinely consult with LIAM sales and portfolio management personnel regarding market information including, but not limited to, pricing, spread levels and trading activity of ETFs tracking equity, fixed income and commodity indices. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and reports. Lyxor has mandatory research policies and procedures that are reasonably designed to (i) ensure that purported facts in research reports are based on reliable information and (ii) to prevent improper selective or tiered dissemination of research reports. In addition, research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, competitive factors and LIAM’s total revenues including revenues from management fees and investment advisory fees and distribution fees.

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