Concept K Fund: Navigating volatility & delivering growth in 2025
Fund News
Q&A with Henning Potstada, Deputy Portfolio Manager, DWS
How did the Concept K Fund perform1?
| 2025 | 2 Years Ann | 3 Years Ann | 5 Years Ann | |
| Concept K1 | 6.9% | 7.1% | 7.1% | 5.5% |
Can you remind us how the Concept K Fund works?
The Concept K Fund invests flexibly across multiple asset classes with the aim of capturing most market upside while reducing volatility. It applies strict daily risk controls, aiming to limit losses to no more than 10% in any calendar year (these aims are not guaranteed). The portfolio blends core defensive assets with income‑generating holdings and tactical/strategic overlays. The fund is actively managed by an experienced, award‑winning team focused on steady long‑term growth with controlled risk.
How did the Concept K Fund perform in 2025?
The Concept K Fund finished 2025 at a new all-time high, delivering a 6.9% return for investors. While this is good news per se, we think that 2025 once again showed the importance of active management and flexibility employed. Looking back at 2025, there are a few key points in performance and risk management that made the difference.
First, we decided to limit our portfolio risk in March 2025. Ahead of the so-called Liberation Day, we reduced our equity exposure from 43% to 32%. Secondly, we significantly reduced our USD exposure from a high of 35% in 2025 to a low of 9% (going into 2026, we have around 12% USD exposure). Both decisions were important. Following President Trump’s announcement of Tariffs on April 2, the market reacted with significant moves: US Equities, US Treasuries, and the US Dollar all declined. And while US equities and US Treasuries reversed these losses in the following months, the US Dollar remained devalued against the Euro. In a nutshell, our risk-reduction decisions led to lower volatility in April and limited losses. Clearly a good contribution to last year’s decent performance.
Second, we went back into equity markets during the summer (going back above 40% equity). Although we acknowledge elevated valuations, especially in Tech stocks, and the inherent risks associated with high expectations for AI spending and interest rate cuts, we believe that mid- to longer-term equities will be a key contributor to performance. Since the launch of DWS Concept Kaldemorgen, equity has been the major driver of total return. Finally, we also saw decent momentum in equity markets, especially in the US, following the start of the rate-cut cycle and the continued announcement of AI-related deals.
This positive environment clearly helped our performance following our equity rebuild in Summer 2025. The last important portfolio change in 2025 was the significant build-up of EUR Investment Grade credit. We currently hold around 26% in EUR IG credit, which is the highest level in 10 years. This is based on two reasons. On the one hand, we see the current yield level of around 3.3% as attractive over the medium term as a source of continuous income for the fund. On the other hand, we want to ensure decent diversification for DWS Concept Kaldemorgen. For this, we have two main pockets as of now: gold and high-grade fixed income. Both worked in past crises as a diversifier for portfolios. Going into 2026 and beyond, we believe there is potential risk in capital markets, and those two assets (accounting for around 50% of our portfolio) should serve us well in the event of unexpected risks.
A few details on performance 2025: equities delivered around 700bps, followed by gold (350bps) and Fixed Income (90bps). The only detractor, despite the early USD risk reduction, was currencies, which were -350bps. Without the early measures, this would have been more like 500bps. As noted at the beginning, it was a good year for flexible managers.
What is DWS outlook for markets in 2026?
We start 2026 with a clear focus on diversification. Given the various challenges, from geopolitical risks to high valuations and constant newsroom issues, we are going into the year with a very clear view. First, we believe the short-duration income period is over (a pity… rates of 4%+ were great), and we need higher yields from a term premium and some credit risk premium. As a result, we maintain our focus on IG credit (around 26%), some German bunds (around 9%), and a few US Treasuries (around 4%). The latter is low following our changes made in 2025, mainly due to USD risk, high FX hedging costs, and ongoing discussions around US debt, the budget deficit, and FED independence. For the time being, we feel better placed in EUR than in USD. Further on Fixed Income, we do NOT seek HY exposure. Risk-Return does not seem sufficient, especially as we keep the risky part of the full fund focused on equities. Second, we keep our gold allocation close to the maximum of 10%, currently 9.3%. This is mostly about diversification in a very uncertain world. The events in 2022 (the freezing of Russian assets) led to CB gold buying; the events in 2025 around FED independence, plus general investor momentum, led to gold becoming an increasingly “true hard currency”. History, as well as recent weeks, show that gold can act as a diversifier in times of crisis and uncertainty – exactly the reason why we have it allocated. Equities are currently around 42% of the portfolio, which is 5 percentage points above the historical average. However, we do maintain clear diversification within equities (around 1/3 in growth, cyclicals, and stability stocks). This kind of “within equity” diversification is key for us. We acknowledge high valuations and high concentration risk in indices (see, for example, the S&P 500, where a few stocks were the main drivers last year).
Therefore, we strive to balance participation in expected mid- to long-term equity growth with the need to limit single-sided risks. In terms of foreign currencies, USD remains the largest non-EUR allocation at 12%. Others are the Swiss Franc, Japanese Yen, and Korean Won, all in the low single digits. We currently do not see the point of having high USD exposure given risks and uncertainties. The safe-haven feature does not look particularly compelling at the moment. Overall, we believe our portfolio is well-suited for 2026, poised to capture opportunities while balancing risks through diversification.
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1. Source: Longboat Analytics, based on the price calculated for 01 January 2026, which is calculated using close of market price from the previous working day. Performance figures are quoted gross of fees. Please note that the deduction of fees would reduce the performance shown. The Annual Management Charge (AMC) for Series 1 of the DWS Concept K Fund is 1.05%. Other funds may have higher or lower AMCs. Where available, different series of the same fund may also carry different AMCs. For full details, please refer to the relevant Financial Broker Guide or Charging Sheet. Additional charges may apply. The information in this document does not constitute investment advice. It does not consider the investment objectives, financial position, or needs of any particular investor. Fund performance is updated daily on our fund centre on aviva.ie.
| Warning: If you invest in this fund you may lose some or all of the money you invest. Warning: Past performance is not a reliable guide to future performance. Warning: The value of your investment may go down as well as up. Warning: These funds may be affected by changes in currency exchange rates. |