While the stock markets climbed to new record highs in the first half of the year, the first central banks also initiated a turnaround in monetary policy by cutting interest rates. Will the environment remain positive?

In the Funds exclusive series, the fund managers of selected funds look back on developments in the first half of 2024 and give their assessment of what the markets could expect in 2024. (Note: Prognoses are not a reliable indicator of future performance).

Fund & Performance

The ERSTE EQUITY RESEARCH is an equity fund that invests worldwide in the form of a concentrated portfolio. The fund selection is based on the publicly accessible recommendation list of Erste Group Research. Primarily, companies with a "BUY" rating on the recommendation list are considered for investment.

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 Harald Egger

How did the fund perform in the first half of the year?

ERSTE EQUITY RESEARCH recorded a very positive performance in the first half of the year at 19.2% (as of 30 June 2024). Most of the gains were made in the first quarter of the year. The IT sector was responsible for almost 50% of the gains, with the sharp rise of Nvidia contributing significantly to the overall performance. The communication services sector also delivered a very positive contribution (Google, Meta, and Netflix). In general, the share price fantasy of artificial intelligence (AI) is currently the dominant driver of the equity market.

Note: The companies listed here have been selected as examples and do not constitute an investment recommendation.  The portfolio positions listed may change at any time as part of active management. There is no guarantee that securities will be permanently included in the portfolio. Please note that investing in securities involves risks as well as opportunities.

 

What was the focus of the fund in the first half of 2024?

In the first half of the year, the fund focussed on two areas: firstly, it invested in companies benefiting from the AI boom and secondly, in the oil sector as a hedge against the geopolitical risks the world is currently facing. However, we slightly reduced our strong overweight in the IT over the course of the reporting period in order to realise gains. At the same time, we have increased our exposure to the financial sector, which is benefiting from higher interest rates.

 

What are your expectations for the rest of the year 2024?

We expect economic growth to slow in the second half of the year and inflation to weaken, although it should remain above the central banks' target level of 2%. In this environment, quality and growth shares should continue to perform well. With the exception of the financial sector, we do not currently see any favourable conditions for cyclical companies. (Note: Prognoses are not reliable indicator of future performance.)

 

What are the priorities of the fund management team?

We will not change our focus on IT, financials, and oil for the time being. In addition, we remain strongly positioned in non-cyclical consumer goods. However, Erste Research and the fund management react very quickly to new trends, which is why the turnover rate in the fund can be high in some cases.

In general, the fund focuses on quality and growth shares with a small contingent of cyclicals mixed in. In contrast to other funds, this fund invests equally weighted in about 50 companies that have been given a buy rating by Erste Group Research. Mega-caps may command a double weighting in the fund (currently e.g. Nvidia). Currencies remain unhedged, with over 60% invested in USD. This means that developments in foreign currencies play a significant part in terms of overall performance.

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.