Scalable Capital was the first German neobroker to launch its own world ETF together with Xtrackers and promises structural outperformance - but what's behind it?
The "Scalable MSCI AC World Xtrackers UCITS ETF" in review
Shortly after the Munich-based fintech Scalable Capital announced far-reaching changes in the winter of 2024, it launched a new world ETF together with the Frankfurt-based asset manager DWS and its ETF subsidiary Xtrackers. In addition to a new replication method - which has not previously been available in this form for ETFs in Europe - the two companies have come up with a few other things to rival existing world ETFs.
Update: Scalable ETF cracks 250 million Euro fund volume
After a good six months, the ETF has already collected a quarter of a billion Euros from private investors, confirming the interest of many ETF fans in the fund's new approach. In this article, we take a closer look at the product.
It invests in 23 industrialised and 24 emerging markets (large and mid-caps)
TER of 0.00 % for the start (after the first year, the TER of 0.17 % p.a. applies)
Innovative "hybrid replication method": ETF tracks the index using both physical and synthetic replication
ETF promises structural outperformance of around 22 basis points per year (before TER) compared to other global ETFs
The fund reinvests its income directly in the fund volume
The ETF is launched in Luxembourg (LU-ISIN)
Xtrackers manages the ETF
Scalable Capital is active as a "Portfolio Construction Advisor" in an advisory role
Important: The product can be traded via all common brokers and trading centres in Germany (and many other European countries), i.e. not only via Scalable Capital itself
Questions that naturally arise when looking at the facts are primarily about the "structural outperformance" and the new "hybrid replication method". Let's take a closer look at both.
Structural outperformance through innovative "hybrid replication"?
Let's start with the new hybrid replication method used by the ETF. Until now, replication methods of ETFs were explained relatively simply: Either the ETF replicates its index directly by buying the securities contained in the index (physical replication) or it tracks it with the help of a financial swap (swap / synthetic replication).
Because why choose when you can simply do both? The new Scalable World ETF is the first of its kind to dynamically replicate its index. It uses direct, physical replication for some markets, while other sub-segments - such as the US market or Chinese mainland shares (A-shares) - are replicated using swaps.
Why does the ETF use two different replication methods?
This methodology enables the ETF to replicate the various regions or submarkets as efficiently as possible.
This may sound complex at first glance, but in the end it is exactly what many investors already do with individual ETFs in their portfolios, some of which are physically replicating and others synthetically replicating - only that it is combined in one ETF. Although the concept of hybrid replication is new, the processes behind it are well-known and proven.
The synthetic replication of US equities for example offers a tax advantage for UCITS ETFs launched in Europe. How so? While physically replicating ETFs have to pay 15 % (ETFs launched in Ireland) or 30 % (ETFs launched in other countries) withholding tax on income from US equities, this withholding tax does not apply to synthetic ETFs. As investments are not made directly in distributing US equities, no withholding tax-relevant income is incurred.
Scalable Capital therefore also uses corresponding ETFs for its own robo-advisor. The same applies to Chinese A-shares, which can be modelled much more efficiently in a synthetical than physical way.
Advantages of synthetic replication of Chinese A-shares
For many professional investors (such as hedge funds) Chinese mainland stocks (A-shares) are an interesting asset class. However, these investors often have limited access, for example for short selling (= taking short positions) to hedge their market risk. As a result, these market participants are prepared to pay the swap counterparties of synthetic ETFs (usually large banks) a premium on the short exposure to which the counterparties are exposed. This additional premium is partially passed on to investors in synthetic A-share ETFs and has historically led to outperformance. The premium can fluctuate over time and is primarily dependent on the demand of these market participants.
By optimising replication in this way, the ETF increases the expected return. A comparison of the largest ETFs on the S&P 500 shows that this leads to performance advantages in the long term. If we look at the oldest physical (orange line) and synthetic ETF (blue line), the swap-based fund is actually ahead over the given period. At least in the case of funds with a similar TER, the advantage of the withholding tax savings described above actually seems to apply (15.56 % p.a. to 15.28 % p.a.).
Comparison: Physical vs. synthetic S&P 500 ETF
Source: justETF Research; as at 16/12/2024
In addition to the advantages of the dynamic replication method, the ETF managed by Xtrackers also relies on securities lending to generate additional income for investors. The "structural outperformance" expected by the providers is said to amount to around 22 basis points per year. At least when looking at the two S&P 500 ETFs mentioned above, it can be stated that this was possible in the past due to the swap construction.
Comparison: How the world ETF from Scalable and Xtrackers differs from the competition
Before we share our conclusion on the new world ETF with you, let's take a look at how the ETF from Scalable Capital and Xtrackers differs from the competition.
The world ETF from Scalable and Xtrackers compared to the "rest of the world"
Source: justETF Research, Scalable Capital; as of 30/07/2025 1TER in the first year, thereafter 0.17 % p.a.
A look at the table shows that the Scalable ETF with its regular TER of 0.17 % is roughly in line with other global ETFs. The TER reduction to 0.00 % in the first year puts the ETF at the top - at least for this period.
Just like the other MSCI ACWI, FTSE All World and Solactive products, the ETF focuses on large and mid-caps. Small caps are only found in SPDR's MSCI ACWI IMI among the aforementioned competitors.
However, the ETF is the only one to offer hybrid replication and thus offers both securities lending and structural outperformance opportunities thanks to the hybrid replication method. No other ETF so far combines these two things.
Our conclusion on the Scalable ETF
The market for online brokers and ETFs remains on the move and the first neobroker is now pushing into the ETF market. Scalable Capital has already gained the experience for this in robo asset management, which it launched in 2014. It is therefore an obvious step for the Munich-based company to transfer this expertise to its own ETF product.
But now to the product itself: When looking at the new Scalable MSCI AC World Xtrackers ETF, it is clear that Scalable Capital and Xtrackers have definitely put a lot of research and expertise into the development of the new world ETF. This is quite different from the previous world ETFs - especially thanks to the new hybrid replication method - and is by no means "just another" ETF on MSCI ACWI, FTSE All World and Co.
This also shows that the promise of structural outperformance is a given. Of course, as can be clearly seen from the chart comparison above, this will only materialise in the longer term and will only benefit from the compound interest effect years later.
Fans of physically replicating ETFs will have to turn a blind eye due to the (partial) synthetic replication. Important to know: The risk of suffering a loss through swap ETFs has already been practically eliminated for you as an investor by a wide range of protection mechanisms. This is also shown by the past, in which investors have not suffered any losses from the structure of swap ETFs that we are aware of.
Further, those who would like to have small caps represented in an all-in-one ETF solution will not get their money's worth. For everyone else, the new ETF from Scalable Capital and Xtrackers is definitely worth a look.
You can find all information on the Ticker, ISIN and tradability in our ETF profile for the Scalable ETF. If you have an account with Scalable Capital, you can even buy and save it permanently free of charge as a PRIME ETF.
Stay up to date
Free English newsletter including the latest news & knowledge about investing in ETFs.