The ERSTE STOCK VIENNA (feeder fund) invests through the RT Österreich Aktienfonds (master fund) in companies with initial listing on the Vienna Stock Exchange. The investment process of the RT Österreich Aktienfonds is based on fundamental company analysis. When selecting stocks, the focus is on high-quality, high-growth companies.

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.

• Fund benefited from high weighting of attractive consumer good titles
• Positions in cyclical industrials contributed positively
• Cautiously optimistic for the second half

What conclusions do you draw from the first half of 2023?

After a good start into 2023, the momentum slowed down somewhat towards the middle of the year. This was mainly due to falling share prices on the international equity markets triggered by the government debt debate and the banking crisis in the USA. Fears of a global economic slump also affected the Austrian market, which in turn also affected ERSTE STOCK VIENNA. Still, the fund had gained around 7% (as of 4 July 2023).

As a feeder fund, ERSTE STOCK VIENNA invests exclusively in the Ringturm Österreich Aktienfonds equity fund. This fund in turn managed to score points in the current volatile sideways movement on the back of active equity selection. In doing so, we benefited from a high weighting in attractive shares from the consumer goods sector such as Do & Co. The increase in travel activity and the company's good business performance led to a significant rise in share price.

What was the development like in other sectors?

Our allocation in cyclical industrials such as Voestalpine also contributed positively to the fund performance. Among the year-to-date losers were banks and utilities. In addition to the decline in electricity prices, the latter also suffered from increasing political headwinds, which resulted in several tax increases and levies.

The banking crisis in the USA had a significantly negative impact on bank shares. While we were slightly overweight in the sector at the beginning of the year, we took profits during the rise in the first months and were thus able to partially avoid the subsequent decline. We believe that Austrian banks should be only little affected by the problems of US regional banks due to their significantly lower-risk business model, and we therefore regard current levels as attractive for re-entry.

What do you expect for the second half of the year?

As it stands, we are cautiously optimistic for the second half of 2023. A solution to the US debt debate has emerged, which should come with a positive effect on the markets. The economic environment appears generally solid, although individual sectors are showing weaknesses (construction materials, real estate). For consumer shares in particular, we expect the positive development that we have seen so far in 2023 to continue. Government support programmes will continue, although their extent is likely to be significantly reduced as compared to the previous year.

From our point of view, two questions will be crucial for the development of the markets from here on out:

1. Can the companies maintain their currently high margins?
2. What will happen on the inflation front?

We are cautiously optimistic with respect to the first issue, although we should see significant differences within sectors. The ability to dictate prices and the market structure should play important roles, and share selection should be decisive in the second half of the year. We are a little more cautious on the inflation question. The markets are currently pricing in a sharp slowdown, which we view with scepticism. As a result, interest rates could remain at current levels for longer than investors are currently foreseeing. Bank shares could benefit from this, although provisions for non-performing loans need to be kept in mind in this environment. We do, however, remain sceptical for the real estate market.

We are also cautious about companies with high leverage and a shaky market position. If higher staff costs cannot be passed on, this can quickly lead to a sharp contraction in margins. That being said, we believe that these are isolated cases.

The future political development poses a big question mark; new taxes could hit certain industries. Apart from these difficult-to-predict influences, however, we are cautiously optimistic about the overall development and reflect this in the positioning of our fund.

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 VIENNA