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).

"The main drivers were declines in inflation across Europe and the USA and the resulting hope by the markets of interest rate cuts from the ECB and the Fed in the near future."

Bernhard Selinger, fund manager ERSTE FUTURE INVEST

Fund & Performance

ERSTE FUTURE INVEST is an actively managed, global equity fund investing in megatrends (promising future trends). Equities associated with one or more of the following trends are preferred in the selection process: health and health provision, lifestyle, technology and innovation, environment and clean energy, and emerging markets.

Note: Past performance is not a reliable indicator of future performance. Due to the very short term, this presentation of the performance is not very meaningful.

Performance since start of the fund (10.10.2019). 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 Selinger

In which companies does ERSTE FUTURE INVEST invest?

As a global equity fund focussing on megatrends, ERSTE FUTURE INVEST covers a broad range of important future-oriented topics (health, technology, environment, lifestyle, economies of change). Megatrends are hugely transformative forces that will decisively change society and the economy in the long term, which is why they should also be taken into account in long-term investments.

The broad mix of megatrends in ERSTE FUTURE INVEST can also have a stabilising effect on the portfolio, especially as the various themes behave differently within specific market phases. Our stock selection is based on fundamental research and has a long-term focus in line with the megatrends. (Note: Please note that an investment in securities entails risks in addition to the opportunities described.)

 

What conclusions can you draw for ERSTE FUTURE INVEST for the first half of the year?

Global equity markets have performed very favourably so far in 2024. The main drivers were declines in inflation across Europe and the USA and the resulting hope by the markets of interest rate cuts from the ECB and the Fed in the near future. The most recent corporate reporting season (Q1 2024) exceeded expectations in both Europe and the USA. In terms of the S&P500, around 78% of companies exceeded analysts' earnings forecasts.

ERSTE FUTURE INVEST posted a very positive performance in the first half of 2024, benefiting above all from shares subsumed in the megatrend technology. (Note: Please note that an investment in securities entails risks in addition to the opportunities described.)

 

What do you expect for the second half of the year in terms of themes in your funds?

  • Megatrend healthcare

Diseases resulting from an unhealthy diet and lack of exercise are currently on the rise, particularly in emerging markets. Demographic change and an ageing society are a huge long-term social challenge. 

Example company ERSTE FUTURE INVEST: Novo Nordisk (DK, EUR 552bn market cap)

o Global leader in diabetes care and pioneer in obesity drug research (2023 market launch of "Wegovy").

o Convenience food (high fat, sugar and sodium content) is also gaining ground in emerging markets.

o By 2050, the medical costs of poor nutrition (e.g. fast food) could reach about 3% of global economic output (source: WHO).

  • Megatrend technology

The large number of current hacking/phishing attacks on companies, organisations and countries highlights that there is no alternative to investing in IT security and infrastructure.. The digitalisation megatrend is advancing faster than ever and is constantly opening up new fields of application, e.g. ChatGPT as an “iPhone moment” for artificial intelligence thanks to the first widespread use of this technology (> 100 million users in 3 months!).

Widespread use of robotics and artificial intelligence across all industries (e.g. IoT – Internet of Things) requires ever smaller chips with higher computing power while minimising energy consumption.

Example company ERSTE FUTURE INVEST: TSMC (Taiwan, EUR 605bn market cap)

o The world's technologically leading contract manufacturer of computer chips.

o Benefits from chip demand and the growth of its largest customers, e.g. Apple, AMD, NVIDIA.

o Due to the large number of new fields of application, the requirement for computer chips has increased significantly in recent years and the technical complexity of the manufacturing process has risen disproportionately as a result.

o The company therefore benefits from growth in the semiconductor industry (demand for chips) as well as from the massive increase in complexity in the manufacturing process due to its absolute technology leadership (e.g. first 3 nanometre chip produced in 2022).

  • Megatrend environment

Continued strong political support for renewable energy from wind & solar. The EU Taxonomy, as an action plan to channel capital into ecological & sustainable activities, is decidedly promoting the transition to a circular economy..

Example company ERSTE FUTURE INVEST: Kurita Water (JP, EUR 5bn market cap)

o Manufacturers of systems and chemicals for water treatment (petrochemicals, steel industry, paper, and pulp production); reduces water consumption in the production process.

o Population and income growth (new middle class) force existing goods to be used more consciously and efficiently.

o Only 0.25% of the world's water resources are drinkable. According to UNESCO estimates, drinking water reserves will become even scarcer by around 40% in the next ten years

  • Megatrend lifestyle

Global e-commerce spending has normalised again after the Covid boom and the subsequent slump in the wake of the reopening of local retail and is growing at an annual double-digit rate, in line with the long-term historical trend.

Large pent-up demand from the pandemic and numerous special government payments in many European countries and the USA continue to lead to unabated high spending on leisure and travel. However, we can assume that this trend could weaken somewhat over the course of the year, depending on the degree of economic development in Europe and the USA.

Example company ERSTE FUTURE INVEST: Mastercard (USA EUR 411bn market cap)

o Second largest global payment service provider (after Visa) for credit & debit cards (well-known brands Mastercard & Maestro) for cashless payments and cash withdrawals at ATMs worldwide.

o Rising global consumer spending (e.g. e-commerce) and the continuing trend towards cashless payments are the growth drivers for the company.

o Mastercard is also benefiting from increased credit card use due to the rise in international travel.

o Stable business model with high profitability and strong cash flow.

  • Megatrend economies of change

In addition to high youth unemployment, problems in the property market are currently clouding growth prospects.

The local market in China is enormous with more than 100 cities >1 million inhabitants and increasing purchasing power; for example, the e-commerce market in China is already three times larger than that of the USA. There is currently also an increased focus on companies that benefit from the plan to reduce social inequality (“common prosperity”), e.g. in the healthcare sector.

Example company ERSTE FUTURE INVEST: ZTO Express (China, EUR 18bn market cap)

o Largest express delivery company in China with a market share of about 23% and a distribution network covering roughly 96% of the country.

o The company delivers over one billion parcels a month from online retailers on major platforms such as Alibaba and JD.com.

o China is by far the largest express shipping market in the world and is growing at a double-digit rate every year thanks to the unbroken e-commerce boom.

 

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. Promising companies may not be investable for sustainability reasons. It is not yet possible to predict which companies will benefit most from these trends in the long term.

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.