ERSTE RESPONSIBLE BOND MÜNDEL invests in bonds from Austrian issuers that are denominated in euros (federal bonds, "Pfandbriefe" and well-founded bank bonds). The investment in bonds of companies and countries that are among the pioneers when it comes to respecting ecological, social and governance aspects, is at the forefront of the investment decision. A holistic ESG approach also takes ethical aspects into account (Note: Please note that investments in sustainable investment funds involve risks as well as opportunities).

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 do you sum up the last year?

In order to fight the accelerating momentum of inflation in the first half of 2023, a large number of central banks have responded with an extraordinary tightening of their very loose monetary policy. The European Central Bank, for example, raised the deposit rate sharply in several steps, most recently to 4% in September 2023.

These aggressive hikes of the key-lending rates caused very volatile movements in bonds in 2023 with temporary losses, although the fund achieved a gain of 5.3% year-on-year.

What is your focus in this environment?

We continuously adjusted the fund's maturity management to the monetary policy and economic environment.

We continued to invest in Austrian covered bonds as well as bonds guaranteed by the provincial governments and the federal government in order to benefit from the attractive interest rate differential to Austrian government bonds. In the year to date, this share has been further increased to a total of around 50% of assets under fund management.

Note: In the context of active management, the portfolio positions mentioned may change at any time.

The fund is geared towards the strict sustainability criteria of Erste Asset Management.

What are your expectations for the new year 2024?

Further developments will depend not only on how quickly and sustainably inflation rates continue to fall, but also increasingly on the economic development from here on in, as economic growth in the Eurozone has already suffered noticeably as a result of the drastic interest rate hikes. Some countries in the Eurozone have now even slid into a slight recession, which makes further interest rate hikes by the ECB much more difficult.

Due to the lower inflation rate and the increased risk of recession, the ECB has recently paused its interest rate hike cycle. However, the bank has also indicated that it intends to remain at this interest rate level for longer. The market also expects the interest rate hike cycle to finish by the end of 2023 and envisages possible initial interest rate cuts in the second half of 2024.

That being said, the economic slowdown and rising recession risks associated with the sharp interest rate hikes to date should also contain any further sharp increases in yields for longer maturities. Together with the now attractive yields on Austrian government bonds across the entire yield curve, this represents a good starting point for 2024.

Note: Prognoses are not a reliable indicator of future performance.

Based on this, what are your priorities for the fund?

Building on this, the fund management team will continue to focus on maturity and yield curve management in 2024.

The high proportion of covered bonds also remains a strategic focus for 2024 and will be maintained for the time being, depending on the development of the interest rate differential.

ERSTE RESPONSIBLE BOND MÜNDEL