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.

"All in all, we can still see upside potential for the technology sector, driven by stable demand for technology solutions."

Bernhard Ruttensdorfer, fund manager ERSTE STOCK TECHNO

Fund & Performance

The ERSTE STOCK TECHNO mainly invests in companies from developed technology markets. The fund's investment process is based on fundamental business analysis. The majority of companies in this area can be found in the United States. As a result, Pacific and European equities tend to play a subordinated role in the fund. When selecting stocks, the focus is on high-quality, high-growth companies. cological and social factors as well as corporate management factors are integrated into the investment process.

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 Bernhard Ruttensdorfer

  • Artificial Intelligence as dominant topic in the first half
  • Less headwind from the interest rate front
  • Further upside potential in the technology sector

 

What conclusions would you draw from the first half of 2023 in the technology sector?

The first half of 2023 was driven by a big boost from Artificial Intelligence (AI) applications. The generic AI service ChatGPT became popular worldwide and recorded unprecedented user growth. However, it soon became obvious that AI was not only of interest to consumers: a multitude of professional/corporate user products could also be improved by AI. These include pattern recognition (IT security, health, etc.), graphic generation, process optimisation, etc. Numerous companies in the technology sector benefit from these efforts, with examples including Nvidia, Broadcom, AMD, Adobe, ASM, ASML, and TSMC.

What was your focus in the first half?

The fund focused on two areas in the first half of the year: software and AI. The valuations we have seen in software companies in recent months have convinced us again to invest more in this industry. While there is still a noticeable reluctance on the part of clients to sign new deals, we can see the market bottoming out. We also expect a significant recovery in business after the current phase.

We covered AI with our positions in AMD, Broadcom, and ASML, among others. At the top of the AI list, however, is Nvidia. The company is a leader in that it not only offers cutting-edge technology in the graphics chip area, but also the ecosystem to go with it. Software, server connections, and tools and models based on them create a compelling sales proposition. Broadcom and AMD are number two and three in the graphics chip segment. And it is these graphics chips that shoulder the brunt of processing requests from AI software.

On the interest rate front, the headwinds that we felt in 2022 have subsided. Back then, technology shares were particularly affected by the interest rate hikes then. In the course of the summer, however, interest rates are expected to peak in both the EU and the US. On a positive note, the enormous cash holdings of tech companies have also started to earn higher interest income.

What do you expect from the markets in the second half of the year?

We cannot rule out a recession for the foreseeable future, neither in the EU nor in the USA. At the same time, we do not envisage a massive contraction, given that the current environment would not support this theory. At the end of the day though, the impact of the overall economy on the positioning of the portfolio is limited anyway, given that our investment approach focuses on attractive industries and individual companies. The most attractive companies of these industries form our most significant positions. We can see upside potential in the following industries:

  • Semiconductors: we can see strong demand for AI chips, in particular. Orders from industry and automotive are also stable. One should also bear in mind the solar industry here (semiconductors).
  • Software: attractively valued companies with high growth. The cyber security sub-segment should also record stable demand.
  • Interactive media and entertainment: the market for digital advertising has also seen signs of recovery. Video gaming is at the end of a longer correction phase.

All in all, we can still see upside potential for the technology sector, driven by stable demand for technology solutions.

 

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 STOCK TECHNO

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.