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.

"Further potential interest rate hikes, resulting recession fears and global geopolitical turmoil will remain decisive for the further performance."

Felix Dornaus, fund manager ERSTE BOND EM GOVERNMENT

Fund & Performance

ERSTE BOND EM GOVERNMENT primarily invests in government bonds from global emerging markets. In addition, corporate bonds from issuers in this region can also be added. The securities include both investment grade and high yield bonds.

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 Felix Dornaus

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

In a difficult market environment characterised by rising interest rates especially in the USA, global worries about economic, and geopolitical tensions (war in Ukraine), the fund's performance was slightly negative.

What was the focus of the fund in the first half?

Selective and timely underweighting has minimised the impact of macroeconomic crises in individual countries in the investment universe on the fund's performance. Debt restructuring candidates such as Pakistan, Ghana, Gabon, Zambia, and Lebanon are good examples of this.

We reacted to the risk of interest rate increases by positioning the fund in bonds with shorter remaining time to maturity. However, this somewhat affected current interest income (on the negative side). We overweighted countries with low refinancing vulnerability.

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

Further potential interest rate hikes aimed at combatting inflation and resulting recession fears in the USA and Europe, slowing economic growth in China, and global geopolitical turmoil will remain decisive for the fund’s performance. We do not expect any systemically relevant risks within the emerging markets investment universe. On the contrary, the growth differential between developed and emerging markets is likely to multiply in favour of the latter.

What are your priorities in the fund, based on your expectations?

Comparatively higher economic growth, fiscal resilience, and low vulnerability with regard to refinancing options will be the guiding criteria in the investment decisions of our fund management team. Avoiding debt restructuring situations, especially in the frontier market segment (= preliminary stage of the development into an emerging market), remains significant for value creation. The decreasing pressure to increase interest rates in the developed markets will be reflected in the management of maturities.

ERSTE BOND EM GOVERNMENT

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.