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.)

"While artificial intelligence has been a topic in the technology sector for a long time, it has gained significant momentum this year."

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 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.

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.

Commentary by fund manager Bernhard Ruttensdorfer

How did ERSTE STOCK TECHNO perform in 2023?

The shares ERSTE STOCK TECHNO is invested in have recovered significantly over the course of 2023. Several fundamental factors played a decisive role in optimising the sector after the very strong years during the pandemic. Actions such as cost optimisation in personnel, infrastructure, and marketing were taken. Inventories of computer chips were largely reduced back towards normal levels. We think that demand bottomed out in the summer. Replacement investments and natural demand give cause for optimism.

The development of interest rates in 2023 was important for investor sentiment, as there are indications suggesting that the cycle of interest rate hikes is likely to come to an end. Significantly declining inflation data in Europe and the USA are a clear sign. In particular companies with higher leverage would benefit from interest rates not rising any further.

While artificial intelligence has been a topic in the technology sector for a long time, it has gained significant momentum this year. Software such as ChatGPT took users' favour by storm. This and the possibilities of integrating artificial intelligence into other applications triggered a surge in investment on the part of data centre operators. Server accelerators in the form of graphics cards and specialised microchips were ordered. Even recently tightened export restrictions towards China did not slow down demand.

 

What did you focus on in the fund in 2023?

Since the beginning of the year, ERSTE STOCK TECHNO has focussed heavily on software providers. We have increased our positions in manufacturers of semiconductors such as Nvidia, Intel, and Broadcom over the course of the year. Improving demand and inventory data were decisive factors.

Note: The companies listed here have been selected as examples and do not constitute an investment recommendation. In the context of active management, the portfolio positions mentioned may change at any time. There is no guarantee that securities will be permanently included in the portfolio.

 

What developments do you expect in the new year 2024?

We can see a very positive foundation for the development of the technology sector in 2024.

  • Companies have optimally positioned themselves for the time after the coronavirus pandemic by adjusting their personnel and infrastructure.
  • Demand for hardware and software is recovering. Levels bottomed out in summer 2023. Additional investments are necessary to cover the increasing demand for computing power. Artificial intelligence and automation software are increasingly being used to step up employee productivity and compensate for labour shortages. Companies are forging ahead with replacement investments.
  • The inventories of computer chips have largely normalised. Capacity utilisation at chip manufacturers will recover.
  • The expansion of chip production in the USA and Europe will continue (subsidy programmes for years).

 

Due to these factors, both sales and earnings growth will speed up significantly in 2024 compared to 2023 (Note: Prognoses are not a reliable indicator of future performance).

Even in the event of a possible slowdown in economic growth, we can see further upside potential for the technology sector, as demand is supported not only in the short term but also in the long term by structural trends such as artificial intelligence, autonomous driving, the Internet of Things, cloud computing, the hybrid workplace, and cyber security (Note: Please note that an investment in securities entails risks in addition to the opportunities described). In the fund, we favour the software, semiconductors, and cyber security sectors.

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.