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.

"Growth and quality factors will most likely remain in the investors focus."

Alexander Sikora-Sickl, fund manager ERSTE RESPONSIBLE STOCK DIVIDEND

Fund & Performance

The ERSTE RESPONSIBLE STOCK DIVIDEND is a sustainability equity fund that invests worldwide primarily in shares of selected companies from developed markets. The fund's investment process is based on fundamental business analysis. When selecting stocks, the focus is on companies with high to medium market capitalization, attractive dividend yields and, in the past, relatively low price fluctuations. Investing in stocks of companies, that are pioneers in terms of ecological, social and governance aspects, are crucial for investment decisions. 

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. Due to the very short term, this presentation of the performance is not very meaningful.

Commentary by fund manager Alexander Sikora-Sickl

  • Majority of companies reported robust results
  • High dividend (high dividends) and minimum volatility (low fluctuations) factors moving sideways
  • Growth and quality are likely to remain the focus of investors

 

What are your conclusions from the first half of 2023 on the market?

The first half of 2023 on the global equity markets was dominated by expectations of an early peak in the interest rate hike cycle and, at worst, a mild recession in Europe and the USA. At the same time, the majority of companies in these two regions reported robust results, both for Q4 2022 and Q1 2023.

In this environment, the market segments that had lagged the market during the phase of heightened economic uncertainty and rising interest rates were outperforming the rest. This was particularly true for the European equity markets, as well as growth and quality shares. The technology sector also recovered earlier losses. By contrast, defensive sectors such as consumer staples and health care recorded a weak performance.

How did ERSTE RESPONSIBLE STOCK DIVIDEND perform in this environment?

The first half was a rather difficult one for ERSTE RESPONSIBLE STOCK DIVIDEND in view of the above-mentioned market environment, as a result of which the fund incurred losses in contrast to the general trend on the markets. The factors high dividend and minimum volatility (low fluctuations), which the fund has based its strategy on, were moving sideways.

The prominent weighting of the USA and the focus on defensive sectors such as consumer staples and healthcare also had a negative impact on fund performance. Well-known names in these sectors (Procter&Gamble, 3M, Pfizer, etc.) incurred significant losses. The fund’s above-average asset allocation in such equities echoed its dedicated focus on large-caps. At the same time, only very few technology shares meet the fund's strict dividend criteria, which is why the portfolio’s low weighting in this sector meant that it was unable to participate in the upswing of technology shares.

What will your priorities be for the fund in the second half of 2023?

In May, the fund underwent its scheduled semi-annual restructuring. On the one hand, we stepped up Europe significantly relative to the USA, and on the other hand, we reduced the exposure to defensive large-capitalised companies (e.g. 3M, AT&T, Pfizer). The shifts at the sector level were generally limited in nature; here, the scope of action is limited due to the predefined factor positioning. We slightly reduced the weightings of health care, basic materials, and real estate were, while increasing high-quality consumer staples as well as industrial and utility shares.

What do you expect for the second half?

The environment seems to remain challenging for ERSTE RESPONSIBLE STOCK DIVIDEND in the second half of 2023, seeing that the general setting should change very little in the foreseeable future. However, we expect the minimum volatility factor to stabilise, and we are also positive about the consumer staples and healthcare sectors in the medium term.

Given that the majority of market participants do not envisage a recession in the major economies and expect interest rates to be cut in the USA at the beginning of 2024, investors will most likely continue to focus on growth and quality factors equities.

 

Note: The companies listed here have been selected as examples and do not constitute investment recommendations. Any portfolio positions of funds disclosed in this document are based on market developments at the time of going to press. In the context of active management, the portfolio positions mentioned may change at any time.

ERSTE RESPONSIBLE STOCK DIVIDEND

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.