The super election year of 2024 lies behind us. In addition to another interest rate hike by the major central banks in the USA and Europe, it brought a potentially landmark election victory for Donald Trump in the US presidential election. What is in store for 2025?

In the Funds check series, the fund managers of selected funds look back on the developments of the past year and give their assessment of what to expect from the stock exchanges in 2025. (Please note: forecasts are no reliable indicator of future performance.)

Fund & Performance

ERSTE BOND DANUBIA mainly invests in government bonds from Eastern-, Southeastern Europe, the former Soviet Union and Turkey. In addition to bonds in local currency, issues are held in hard currency (EUR, USD hedged in EUR).

Note: Please note that an investment in securities entails risks in addition to the opportunities described. Past performance is not a reliable indicator of future performance.

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 Anton Hauser

What was the past year like on the CEE bond markets?

In the past year, the Polish zloty and the Romanian leu moved sideways against the euro. Whereas the Romanian central bank has kept the currency stable for several years, the Polish zloty benefited from the change of government at the end of 2023 in an otherwise negative environment for CEE currencies. Both the Czech koruna and the Hungarian forint depreciated against the euro due to increasingly deteriorating growth prospects in Europe. The Turkish lira continued its downward trend. However, the high yields on Turkish local currency bonds meant that the overall performance for Turkish bonds in euros was positive.

Local bond markets suffered losses across the board. Compared to expectations at the outset of the year, inflation developed less favourably, which was reflected in rising yields. Spreads on hard-currency bonds followed global developments and declined across the board.

 

What do you expect for the markets in the coming months?

In the coming months, the CEE markets should be driven primarily by political events. The introduction of tariffs by the new Trump administration and the possibility of an end to the war in Ukraine are the key issues in this context. In addition, higher inflation rates and high growth, and the resulting reduction in interest rate cuts by the US Federal Reserve, are certainly not positive for the markets in CEE, while a possible recession in the Eurozone should have a positive effect on bond prices and a negative effect on currencies.

 

Separation of Russian assets

Due to the current geopolitical situation in Russia and Ukraine and the associated comprehensive EU and US sanctions against Russia, it is not possible to trade Russian securities. As it is currently not foreseeable when or with what liquidity and at what prices trading in Russian securities will be possible again on any future trading centres, the management company Erste Asset Management GmbH has decided to separate the non-tradable (illiquid) Russian assets from the investment fund in accordance with the legal and regulatory options. The fund assets of the investment fund were split into two parts as a result of the spin-off. One part of the fund assets now consists of the tradable assets without the Russian assets. This part remains in ERSTE BOND DANUBIA. The second part, labelled “ABW ERSTE BOND DANUBIA – Investmentfonds in Abwicklung” (N.B. Investment Fund in Liquidation) – serves the sole purpose of liquidating the illiquid spin-off assets of ERSTE BOND DANUBIA. These illiquid Russian assets will be realised in the best interests of the fund shareholders as soon as conditions permit.

Disclaimer of the management company Erste Asset Management GmbH and its sales agent Erste Bank Group

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. The language of communication of the sales offices is German and the languages of communication of the Management Company also include English. 

The prospectus for UCITS funds (including any amendments) is prepared and published in accordance with the provisions of the InvFG 2011 as amended. 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 conjunction with the InvFG 2011. 

The currently valid versions of the prospectus, the Information for Investors pursuant to Art 21 AIFMG, and the key information document can be found on the website www.erste-am.com under “Mandatory publications” and can be obtained free of charge by interested investors at the offices of the Management Company and at the offices of the depositary bank. The exact date of the most recent publication of the prospectus, the languages in which the key information document is available, and any other locations where the documents can be obtained are indicated on the website www.erste-am.com. A summary of the investor rights is available in German and English on the website www.erste-am.com/investor-rights and can also be obtained from the Management Company.

The Management Company can decide to suspend the provisions it has taken for the sale of unit certificates in other countries in accordance with the regulatory requirements.

Note: You are about to purchase a product that may be difficult to understand. We recommend that you read the indicated fund documents before making an investment decision. In addition to the locations listed above, you can obtain these documents free of charge at the offices of the referring Sparkassen bank and the offices of Erste Bank der oesterreichischen Sparkassen AG. You can also access these documents electronically at www.erste-am.com

N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated.

Our analyses and conclusions are general in nature and do not take into account the individual characteristics of our investors in terms of earnings, taxation, experience and knowledge, investment objective, financial position, capacity for loss, and risk tolerance. 

Please note: Past performance is not a reliable indicator of the future performance of a fund. Investments in securities entail risks in addition to the opportunities presented here. The value of units and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to Art 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.

We are not permitted to directly or indirectly offer, sell, transfer, or deliver this financial product to natural or legal persons whose place of residence or domicile is located in a country where this is legally prohibited. In this case, we may not provide any product information, either.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to Art 21 AIFMG for restrictions on the sale of the fund to American or Russian citizens. 

It is expressly noted that this communication does not provide any investment recommendations, but only expresses our current market assessment. Thus, this communication is not a substitute for investment advice, does not take into account the legal regulations aimed at promoting the independence of financial analyses, and is not subject to a prohibition on trading following the distribution of financial analyses.

This document does not represent a sales activity of the Management Company and therefore may not be construed as an offer for the purchase or sale of financial or investment instruments.

Erste Asset Management GmbH is affiliated with the referring Sparkassen banks and Erste Bank.

Please also read the “Information about us and our securities services” published by your bank.

Subject to misprints and errors.