Funds exclusive: ERSTE BOND EM GOVERNMENT

After a difficult year of 2022 on the markets, many asset classes saw rebounding performances in 2023. While the central banks' turnaround on interest rates ensured a “return to normality” on the bond market, the focus on the equity market was primarily on technology companies. In the Funds exclusive series, the fund managers of selected funds look back on developments of the previous year and give their assessment of what the markets could expect in 2024. (Note: Prognoses are not a reliable indicator of future performance.)

"Interest rate developments in the fight against inflation and the associated economic growth issues, as well as global geopolitical unrest, will remain decisive for performance."

Felix Dornaus, fund manager ERSTE BOND EM GOVERNMENT

ERSTE BOND EM GOVERNMENT primarily invests in government bonds from global emerging markets. In addition, corporate bonds from issuers in this region can also be added. The securities include both investment grade and high yield bonds.

Note: Past performance is not a reliable indicator of future performance.

Performance since start of the fund. 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.

How did the fund perform in 2023?

Despite a difficult market environment characterised by rising interest rates, particularly in the USA, global growth fears and geopolitical tensions (war in Ukraine and war in the Middle East), the fund achieved a positive performance of 6.8%.

What was the focus of the fund in 2023?

We managed to minimise the impact of macroeconomic crises in individual countries in the investment universe on the fund's performance through selective underweighting in good time. Debt restructuring candidates such as Pakistan, Ghana, Gabon, Zambia, and Lebanon are cases in point. We maintained underweights in Jordan and Iraq. The fund never had any exposure to Israel.

The fund responded to the risk of interest rate rises by positioning itself more strongly in assets with shorter remaining time to maturity. However, this protection resulted in lower current interest income.

We overweighted countries with a more relaxed refinancing capability (especially fiscal situation and current account).

What does the fund management team expect for 2024 in terms of global economy and trends?

Interest rate developments in the fight against inflation and the associated economic growth issues in the USA, Europe, and China, as well as global geopolitical unrest, will remain decisive for performance. We do not expect systemically relevant risks within the investment universe of growth markets. The growth differential between the developed and the emerging markets is likely to develop in favour of the latter.

What are your priorities in the fund, based on your expectations?

Comparatively higher economic growth, fiscal resilience, and low vulnerability in terms of refinancing capacity will remain the guiding criteria for the investment decisions of our fund management team. Avoiding debt restructuring situations, particularly in the frontier market segment (= preliminary stage of development towards emerging market), remains significant for performance. Easing pressure on raising interest rates in the developed markets will be reflected in maturity management.

ERSTE BOND EM GOVERNMENT

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.