Discussions regarding customs tariffs and geopolitical tensions were the main focus in the first six months of the year on the financial markets. Where are the markets headed in the second half of 2025?

In our Funds check series, fund managers from selected funds look back on the past year's performance and give their assessment of what we can expect for the rest of the year. (Please note that forecasts are no reliable indicator of future performance and that investing in securities involves risks as well as opportunities.)

Summary

  • The year 2025 had a number of surprises in store, the most significant of which was the US trade policy. US tariffs on the rest of the world had a clear impact, leading to an increase in credit spreads.
  • Due to strong fundamentals, the fund has retained its high weighting in bank bonds, particularly in the subordinated segment.
  • Credit spreads in the BB segment are back at historically low levels following the expansion in April.
  • Companies with stable balance sheets and defensive sectors are coming into focus.

Fund manager Matthias Hauser
(c) Stephan Huger

Fund & Performance

ERSTE BOND CORPORATE BB mainly acquires corporate bonds of international issuers with the rating ""BB"". Bonds with a BBB or B rating may also be purchased. Any foreign currency risks are mostly hedged. The fund's task is to generate current income in euros. Ecological and social factors as well as corporate management factors are integrated into the investment process.

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 Matthias Hauser

How did the fund perform in the first half of 2025?

ERSTE BOND CORPORATE BB got off to a good start in the first two months of the year, generating a return of over 1.2% in that period. However, 2025 had a number of surprises in store, the most significant of which was the US trade policy. US tariffs against the rest of the world had a significant impact, leading to an increase in credit spreads and a corresponding decline in the price of high-yield securities. This was also reflected in the fund's performance. However, the following months saw a steady recovery, and losses from the market turmoil were recovered. The fund thus posted a return of 1.5% for the first half of 2025 (as of 2 July 2025).

 

What were the fund’s main areas of focus in the first half of 2025?

The fund invests primarily in BB-rated companies, with those with relatively better and relatively worse ratings blended in. The fund has retained its high weighting in bank bonds, particularly in the subordinated segment. Due to the strong fundamentals of banks, this sector is considered relatively stable. Bonds from chemicals companies were significantly underweighted. In terms of countries, Italy accounted for the largest geographical allocation, followed by the USA and France.

 

What are the expectations of your fund management team with regard to global economic development and trends, among other things, for the second half?

The unpredictable trade policy of the United States will remain a defining issue on the market. The same applies to its impact on potential inflation in the United States. An interest rate cut in the USA could happen at the end of the year, but the market opinion is divided on this. A distinction must be made here between the USA and Europe, as the ECB has already cut interest rates several times and lowered its inflation outlook, and further interest rate cuts cannot be ruled out.

 

 

What are your priorities in the fund, based on your expectations?

Following the expansion in April, credit spreads in the BB segment are back at historically low levels. In such an environment, it is important to strike a balance between attractive returns and provisions for possible increases in spreads. Companies with stable balance sheets and defensive sectors are coming into focus here.

 

Please note: investing in securities involves risks as well as opportunities.

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