The ERSTE BOND DANUBIA fund invests mainly in government bonds from the Central and East European region (CEE), the former Soviet states, and Turkey. The portfolio contains issues in hard currency (EUR, USD, EUR-hedged) in addition to bonds denominated in local currency. Depending on the market environment, local currencies are temporarily hedged against the euro. Environmental, social, and governance factors are integrated in the investment process. The fund follows an active investment strategy and has no benchmark. The assets are selected on the basis of a discretionary process, and the margin of discretion available to the asset management company is not limited.
Pricing 1 March 2022 to 16 March 2022
Due to the political situation and the resulting uncertainties with regard to the trading of Russian securities contained by the fund and the sanctions imposed against Russia, we suspended the pricing of, and trading in, shares of ERSTE BOND DANUBIA from 1 March 2022.
Suspension of price calculation: ERSTE BOND DANUBIA (erste-am.at)
Pricing and trading were resumed on 16 March 2022.
Resumption of price calculation: ERSTE BOND DANUBIA and Global Flexible Strategy Fund 2 (erste-am.at)
Development between the suspension of pricing and resumed pricing
The depositary bank establishes the net asset value of the investment fund on the basis of the prices of the securities, money market instruments, subscription rights, financial investments, cash, credit balances, receivables and other rights, minus liabilities.
As of 28 February, Russian government bonds accounted for about 9% of assets of the fund.
Given the political situation, the rating agencies downgraded Russian government bonds from investment grade to “highly speculative” (i.e. at risk of default).
Also, due to the capital market sanctions imposed by the EU, the affected securities can currently not be traded.
As of 16 March 2022, the Russian government bonds in the investment fund are valued at 4.5% given the current market scenario. As a result of sales and the fall in prices, the weighting of Russia in the fund has declined to a low single-digit value.
This downgrade relative to the prices prior to the suspended pricing has caused a drastic decrease in the calculatory value of ERSTE BOND DANUBIA. We are evaluating the situation on an ongoing basis and re-value these positions if need be. Any re-valuation affects the calculatory value of the fund.
The majority of ERSTE BOND DANUBIA consists of government bonds from other European states in local currency and hard currency (EUR, USD, EUR-hedged). The bonds of these countries have also taken a hit from the current geopolitical situation.
There is the concern that the conflict may spill over into these countries, which are also commodity importers. As a result, the, in some cases, extreme increase in commodity prices has caused a negative shock. This has exacerbated the already dire situation of high inflation rates.
The following chart shows the performance of three East European currencies. It illustrates how the beginning of the war in Ukraine has caused the East European currencies to depreciate relative to the euro. The losses have been partially recovered in the meantime.