Persistently high inflation and the restrictive course of the central banks continued to dominate the first half of the year. In this series, Funds exclusive, our fund managers look back on the performance of selected funds and explain their view with regard to the second half of the year.

"In the coming months, the local CEE bond markets should be able to benefit from further declines in inflation and thus from an easing of interest rate policies in the region." 

Anton Hauser, fund manager ERSTE BOND DANUBIA

Fund & Performance

ERSTE BOND DANUBIA mainly invests in government bonds from Eastern-, Southeastern Europe, the former Soviet Union and Turkey. In addition to bonds in local currency, issues are held in hard currency (EUR, USD hedged in EUR).

The performance is calculated in accordance with the OeKB method. The management fee as well as any performance-related remuneration is already included. The issue premium which might be applicable on purchase and as well as any individual transaction specific costs or ongoing costs that reduce earnings (e.g. account- and deposit fees) have not been taken into account in this presentation. Past performance is not a reliable indicator of the future performance of a fund.

Performance since start of the fund
Note: Past performance is not a reliable indicator for future performance.

Commentary by fund manager Anton Hauser

  • Local CEE bond markets should benefit from further declines in inflation 
  • Development of currencies will depend on global economic developments

 

How did the fund perform in the first half of 2023??

In the first half of the year, the Polish zloty, the Hungarian forint, and the Czech koruna appreciated against the euro. The main reasons were the decreasing probability of a recession, improving current account balances and signs of falling inflation. The Romanian leu, on the other hand, moved sideways against the euro due to the central bank’s policy. Meanwhile, the Turkish lira maintained its downward trend. While every effort was being made to keep the lira stable before the presidential elections, the depreciation picked up significant momentum in the wake of the election – a factor that should help put the Turkish economy back on more solid footing.

We saw a similar development on the bond markets. In Central European countries, yields continued to fall primarily due to falling inflation expectations, while in Turkey local government bond prices were kept artificially high. In June, however, yields went up in Turkey as well. The spreads of hard currency bonds trended sideways overall in the first half of the year.

What do you expect for the second half in terms of global economy and trends?

In the coming months, the local CEE bond markets should be able to benefit from further declines in inflation and thus from an easing of interest rate policies in the region. The development of currencies, on the other hand, will depend strongly on global economic developments. We expect significant exchange rate losses to occur only in the event of a hard landing of the global economy. In Turkey, following the re-election of President Erdogan, the country should experience a phase of economic stabilisation, which would support the asset class accordingly. All in all, we expect the ERSTE BOND DANUBIA to develop positively in the coming months.

ERSTE BOND DANUBIA

Important legal note:

Prognoses are not a reliable indicator for future performance.

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. Unless indicated otherwise, source: Erste Asset Management GmbH. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art  21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011. The fund prospectus, Information for Investors pursuant to Art  21 AIFMG, and the Key Information Document can be viewed in their latest versions at the website www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the website www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.