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 largest weighting in the fund is the technology sector, which also delivered by far the largest performance contribution among the sectors."

Gerhard Ramberger, fund manager ERSTE RESPONSIBLE STOCK GLOBAL

Fund & Performance

ERSTE RESPONSIBLE STOCK GLOBAL is a sustainable equity fund that primarily invests worldwide in shares of selected companies in the developed markets. The fund's investment process is based on fundamental business analysis. When selecting stocks, high-quality, high-growth companies are used. Investing in shares of companies that are pioneers in terms of 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 Gerhard Ramberger

  • Inflation rates seem to remain above the target corridor for longer
  • Company earnings still positive
  • Companies related to Artificial Intelligence (AI) have been in high demand recently

 

What are your conclusions from the first half of 2023?

The first half of the year continued to be driven by very high inflation rates, which also surprised the central banks in the USA and Europe. It gradually became clear that this was not just a temporary increase in inflation, but that we did indeed have to reckon with figures above the target corridor of around 2% for an extended period of time.

As a result, investors' expectations for the interest rate policy of the FED and the ECB changed significantly. Both the US Federal Reserve and the European Central Bank implemented further interest rate hikes at record speed. Expectations of interest rate cuts were repeatedly pushed back further into the future.

The energy bottleneck in Europe due to the Ukraine war was cushioned by the mild winter, and while energy prices were exorbitant, at least supply was not under threat. Germany, however, recorded two negative quarters in economic growth, which means its economy is now in a technical recession.

How did the equity markets fare in this environment?

Company earnings in the USA and Europe continue to paint a positive picture, even though expectations for the first quarter of 2023 had been revised downwards sharply in advance. However, companies also clearly exceeded expectations in the second quarter.

Overall, the economic environment was rather negative for shares, and after an initially strong performance, we saw a correction on the stock exchanges in February and March. Most recently, companies benefiting from the new possibilities of Artificial Intelligence (AI) such as ChatGPT (generative AI) have been in heavy demand (including Nvidia, Broadcom, Adobe, Alphabet). The technology sector thus set off a new upswing in equity market prices from the end of March. The political agreement in the USA to raise the debt ceiling also had a positive effect, averting the threat of (technical) national bankruptcy in June. The FED meeting on 14 June was the first one without a further rate increase after ten interest rate hikes at previous FED meetings.

How did the fund fare in the first half?

ERSTE RESPONSIBLE STOCK GLOBAL has gained around 11.8% in the year to date (as of 4 July 2023). The largest weighting in the fund, at around 31%, is the technology sector, which also delivered by far the largest performance contribution among the sectors due to its no.1 performance. In the course of the last few months, we have reduced the healthcare sector to 15%, but it remains the sector with the second-biggest sector allocation.

What do you expect for the second half?

While some now see an end to interest rate hikes in the USA, the ECB should continue to increase its key-lending rate further in 2023. Due to the high interest rates in the USA, the probability of a recession has risen sharply, with some economic models putting it at 70% (within twelve months). We are currently holding 5% in cash in order to increase the equity portion again at a lower level, otherwise we are sticking to the current positioning.

 

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 GLOBAL

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.