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

  • Lower interest rates have supported bond prices, particularly for investment-grade corporate bonds with longer maturities.
  • European companies continue to have solid balance sheets, stable earnings, and low default risk, particularly in defensive sectors such as consumer staples and utilities.
  • Ongoing geopolitical tensions (e.g. Ukraine, Middle East) and trade policy changes have increased demand for high-quality issuers as safe havens.
  • The probability of default for investment-grade corporate bonds remains very low, which should benefit ERSTE BOND EURO CORPORATE in uncertain times.

Fund manager Michiel van der Werf
(c) Stephan Huger

Fund & Performance

ERSTE BOND EURO CORPORATE mainly invests in corporate bonds of European issuers with high to medium credit ratings, which are denominated in euros. The rating (creditworthiness) of the bonds in the fund is primarily in the investment grade area. Any foreign currency risks are mostly hedged. 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 Michiel van der Werf

What sort of conclusion do you draw from the first half of 2025 on the capital markets?

By mid-2025, European investment grade corporate bonds had delivered modest but positive returns, navigating an environment characterised by monetary policy changes, geopolitical uncertainty, and sector-specific dynamics.

The European Central Bank (ECB) has signalled a gradual easing cycle. Interest rates were cut four times in the first half of 2025, and further cuts could follow depending on inflation developments. Lower interest rates have supported bond prices, particularly for investment-grade corporate bonds with longer maturities.

 

What were the main areas of focus of your positioning in the first half of 2025?

European companies continue to have solid balance sheets, stable earnings, and low default risk, particularly in defensive sectors such as consumer staples and utilities. Financials and consumer cyclicals are among the top performers, despite high volatility due to the erratic trade policy changes initiated by the US government. As ERSTE BOND EURO CORPORATE is well positioned in this area, the fund was able to capitalise on this.

 

What do you expect for the rest of the year?

Ongoing geopolitical tensions (e.g. Ukraine, Middle East) and the trade policy changes mentioned above have increased demand for high-quality credit as a safe haven. Slower economic growth in the Eurozone has also boosted the appeal of investment-grade bonds for income and capital preservation. The fiscal policy changes in several OECD countries (more spending, leveraged) made investment-grade corporate bonds relatively more attractive, hence their continued outperformance relative to government bonds. At a current yield of around 3.25%, ERSTE BOND EURO CORPORATE continues to offer a solid source of income for risk-averse investors in the medium to long term. In the short term, further interest rate cuts could give prices an additional boost. The probability of default on investment-grade corporate bonds remains very low, which should benefit ERSTE BOND EURO CORPORATE in uncertain times. (Please note: forecasts are no reliable indicator of future performance.)

 

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

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

This document is an advertisement. 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 § 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 § 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 fund prospectus or the Information for Investors pursuant to Art 21 AIFMG and the key information document are 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.

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. Past performance is not a reliable indicator of the future performance of a fund.

Please note: 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 § 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 § 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.

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 Erste Bank and austrian Sparkassen banks.

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