ERSTE SELECT BOND flexibly invests in different bond segments such as national and international government bonds, corporate bonds ("investment grade" and "high yield"), emerging market bonds in hard and local currency, as well as international mortgage bonds. The proportion of high yield bonds and other investments without an investment grade rating may not exceed 25% in total.

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?

At the beginning of the year, the fund was performing ambitiously against the backdrop of the development of the interest rates. In the event, it corrected due to newly rising yields. Over the year, the fund achieved a plus of 5.8%.

What was the focus of the fund in 2023?

The investment focus was clearly on European corporate bonds with good and very good credit ratings. The fund achieved attractive returns with investment grade ratings and moderate maturity risk. The higher ratings are also in line with the more defensive character of the fund. We also allocated capital to government bonds in EUR and occasionally in the USA, and we also used inflation-linked bonds in this context. We complemented the portfolio with high-yield corporate bonds, which performed excellently, and with emerging markets assets, which performed well in local currencies and below average in hard currencies. At times, we would also hold larger volumes in the money market, as interest rates were still trending upwards.

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

We expect a soft landing for the economy in 2024 with a high degree of probability. The development of inflation, which we see continuing to fall, will be of crucial importance. This positive inflation trend will give central banks the opportunity to intervene by cutting interest rates to support the economy in the event of any weakness. The expected trend towards at least stable, but more likely falling key-lending rates will also provide positive input for the capital markets as a whole, but especially for the bond markets.

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

Commodity prices will tend to fall slightly in this scenario. China will continue to implement supportive measures and thus also contribute to stabilising the global economy. Risk factors include in particular the geopolitical situation and central banks clinging to their restrictive policies for too long.

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

In anticipation of falling inflation rates, declining economic momentum, and therefore likely lower interest rates, the focus will be on longer-term corporate and government bonds. Despite the still high level, the money market will play a less relevant role, as falling bond yields will allow a corresponding price gain to be realised. Given that the emerging markets are already slightly ahead of the developed markets in the interest rate cycle, these asset classes can also assume a more prominent position again.

ERSTE SELECT BOND