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

ERSTE GLOBAL INCOME mainly invests in the three asset classes of dividend stocks, high-yield corporate bonds and emerging market bonds. These asset classes are usually characterized by comparatively high current income ("income") in the form of dividends or coupons (Note: Please note that an investment in securities entails risks in addition to the opportunities described). The maximum equity exposure is 50% of the fund volume. Depending on the market assessment, other asset classes can be added tactically.

Note: Past performance is not a reliable indicator of future performance.

Performance since start of the fund (2.11.2015). 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 Philip Schifferegger

How would you sum up the first half of the year?

High-potential asset classes, especially equities, performed solidly in the first half of the year. Robust economic data and good company earnings, particularly in the US technology sector, were the main reasons for the good performance. The slightly higher than expected inflation figures only briefly dampened the positive mood. Even the fact that the previously hoped-for interest rate cuts would fall short of expectations this year did not slow down the positive price momentum in the long term. In the wake of equities, high-yield corporate bonds, particularly from Asian issuers, also put in a positive performance.

Government bonds from emerging markets were moving sideways amid high volatility. Conservative investments, on the other hand, such as government bonds from industrialised countries and investment grade corporate bonds incurred significant losses.

 

What was the focus in terms of fund management this year so far?

The asset allocation of ERSTE GLOBAL INCOME remained largely stable. About one third of the assets were invested in:

  • high-dividend equities
  • high-yield corporate bonds
  • emerging markets bonds.

Both the equity and bond segments made a positive contribution to performance. In the year to date, ERSTE GLOBAL INCOME has recorded a performance of +4.7% (as of 30 June 2024).

 

What are your expectations for the rest of the year?

Given that the US economy is surprisingly robust, we only expect the first interest rate cut for September, which should be followed by two further cuts of 25bps by the end of the year. However, the risks for the US interest rate path are considerable, as uncertainty about growth and inflation is high. A sharper economic downturn than substantiated by our expectations could accelerate the rate cuts, just as prolonged stubborn inflation could lead to a delay.

In this context, we expect a market environment with increased volatility over the next 12 to 18 months but are confident that the positive factors will outweigh the negative ones for the asset classes of ERSTE GLOBAL INCOME (Note: Please note that an investment in securities entails risks in addition to the opportunities described).

ERSTE GLOBAL INCOME

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.