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.

"The developments from here on out will be strongly affected by the next inflation data and the central banks' reaction to it."

Helwig-Dieter Ziering, fund manager ERSTE BOND EURO MÜNDELRENT

Fund & Performance

ERSTE BOND EURO MÜNDELRENT invests in bonds from Austrian issuers that are denominated in euros (federal bonds, "Pfandbriefe" and well-founded bank bonds). The investment in bonds of companies and countries that are among the pioneers when it comes to respecting ecological, social and governance aspects, is at the forefront of the investment decision. A holistic ESG approach also takes ethical aspects into account.

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 Helwig-Dieter Ziering

  • Maturity management was continuously adjusted to the monetary policy and economic environment
  • Further development influenced by next inflation data and the reaction of the central banks to it

 

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

In an effort to fight inflation, central banks around the globe continued to raise their key-lending rates in the first half of 2023. The ECB has most recently raised its key-lending rates for the seventh time in a row to 4% at the beginning of May.

We continuously adjusted the fund's maturity management to the monetary policy and economic environment. In order to achieve a yield surplus, we continued to invest in in Austrian mortgage bonds as well as bonds guaranteed both federally and by provinces. This way, we would benefit from the currently historically high interest rate differential to Austrian government bonds.

In the year to date, we have made sure to maintain or further increase the share of Austrian mortgage bonds above 40% of fund assets under management. The fund adheres to the strict sustainability criteria of Erste Asset Management.

In this market environment, we achieved a slightly positive performance in the first half of the year.

What do you expect for the second half in terms of global economy and trends, and how are you going to implement your expectations in the fund?

The developments from here on out will be strongly affected by the next inflation data and the central banks' reaction to it. While the ECB is signalling that it has already completed a large part of its interest rate hikes, more rate hikes are likely to follow. The markets expect the rate hike cycle to end by the end of 2023 at the latest.

The increasing risks of a recession associated with further rate hikes should keep any additional sharp increases in yields at the long end in check. Together with the now positive yields on Austrian government bonds across the entire yield curve, the starting point for the second half of the year is promising.

Building on this, we will focus in the second half of the year on managing the remaining time to maturity as well as the yield curve. The mortgage bond component also remains a strategic focus for the second half of 2023 and is to be maintained or, if possible, further expanded in order to benefit from the currently attractive interest rate differentials.

Important legal note:

Prognoses are not a reliable indicator for future performance.

Disclaimer

This document is an advertisement. 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 § 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 § 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the web site 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 web site 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 § 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.