Morningstar’s flexible allocation category includes a diverse group of funds with largely unconstrained mandates. These strategies typically have significant leeway to adjust weightings between equities and bonds and to incorporate alternative asset classes into the mix. Private markets have recently garnered more attention, and the rally in gold hasn’t gone unnoticed by investors either.
Against this backdrop, we examine two investment funds in the Morningstar category “Allocation EUR Flexible – Global,” both of which are qualitatively rated by Morningstar analysts. We discuss their similarities and differences: Flossbach von Storch – Multiple Opportunities II and DWS Concept Kaldemorgen.
People
In Germany, the managers of both funds are well-known, though they may need a brief introduction elsewhere. After a successful career as an equity manager, Klaus Kaldemorgen launched this allocation fund in 2011, building the total-return team around it. The team now includes ten dedicated portfolio managers, analysts, and risk managers and is characterized by a collaborative approach.
Bert Flossbach, co-founder of Flossbach von Storch, like Kaldemorgen, has over three decades of investment experience. He has frequently shown a willingness to act decisively and reflect his convictions in the portfolio, making him well-suited to the fund’s unconstrained approach. A strategic team was established around him, while bottom-up analysis is conducted by the broader investment team, which has grown over the years.
Succession planning is underway at DWS, particularly since the firm announced in September 2022 that Christoph Schmidt would become co-lead manager alongside Kaldemorgen. Kaldemorgen (born in 1953) has already begun a gradual transition to the sidelines but remains actively involved. The younger Flossbach, for now, has no plans to retire but is expanding the company’s leadership structure.
Process
The DWS fund is managed top-down, using macroeconomic and thematic insights to allocate between equities, bonds, cash, gold, and, more recently, a liquid alternative strategy. The team actively manages currency risks from the perspective of a euro-based investor, and derivatives are used for tactical positioning or hedging.
The goal of the strategy is to provide more upside than downside relative to global equity markets, while avoiding double-digit losses, with annual volatility of less than 10 percent. Although the maximum drawdown target has been met since inception, the team did allow the fund to exceed the limit during the turbulence of March 2020. This was a minor setback for the process, but the recovery was swift and a forced sale was avoided. Overall, the flexible approach has been well implemented since launch, with a clear focus on risk management.
The FvS fund also follows a top-down discretionary approach, but with a more aggressive profile than DWS. Bottom-up research plays a key role in determining equity allocations. The equity portfolio—typically larger than that of competitors—is rooted in quality stocks, although the manager is willing to accept lower quality if strong valuation support exists. Within the bond sleeve, FvS uses an internally developed corporate rating system to assess issuer creditworthiness.
Portfolio
The FvS fund offers significant flexibility in adjusting equity allocation, with a wide range from 25 percent to 100 percent. Equity exposure fell to 29 percent in March 2020 and peaked at 82 percent in 2021. The average net exposure since its 2007 inception has been 65 percent. DWS is also flexible, but the average equity exposure here has been around 37 percent since 2016 (ranging between 20 percent and 50 percent), and the team consistently aims for a balance between growth, stability, and cyclical stocks.
A strategic allocation to gold is something both funds have in common. FvS Multiple Opportunities invests up to 20 percent in gold. The average exposure has been around 10 percent but may vary, while DWS Concept Kaldemorgen has maintained a relatively stable allocation of about 8 percent. That is significantly higher than the 2 to 3 percent tactical allocation we occasionally see in other allocation funds.
Both funds are large. DWS Concept Kaldemorgen has grown to over 14 billion euros, while FvS Multiple Opportunities manages more than 30 billion euros in assets. However, there is no immediate reason for concern, as the managers primarily trade in liquid assets such as large-cap equities and investment-grade bonds.
Performance
The FvS strategy has built a strong track record since its inception, losing less than peers in down markets while delivering solid returns in rising markets. This is largely due to its above-average equity exposure, which also explains its outperformance versus DWS Concept Kaldemorgen over the past 12 months through the end of March 2025. (April is shaping up to be a different story.) The DWS fund has also stayed true to its mandate and delivered strong risk-adjusted returns since inception.
Thomas De Fauw is a manager research analyst at Morningstar. Morningstar analyzes and rates investment funds based on quantitative and qualitative research. Morningstar is part of the expert panel at Investment Officer.