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

  • Despite a challenging market environment dominated by high volatility, ERSTE FAIR INVEST achieved positive performance in the first half of 2025.
  • Exposure to European equities was further expanded, as these appeared more attractive from both a geopolitical and valuation perspective. At the same time, we reduced the weighting in cyclical consumer goods, as these are more sensitive to economic fluctuations.
  • There are signs of a gradual economic recovery in Europe, which could receive additional tailwinds from the new infrastructure package in Germany.
  • Against the backdrop of ongoing uncertainties, the fund strategy remains cautious and flexible.

Fund manager Markus Gruber
(c) Stephan Huger

Fund & Performance

The ERSTE FAIR INVEST invests worldwide primarily in companies which are identified by the management company through a predefined selection process to have a particularly high social utility. The titles are selected with a focus on companies which, through their actions, have a positive impact in the areas of health & well-being, work and society. Furthermore, the investment process is based on fundamental business analysis. 

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.

Performance since start of the fund (16.8.2021). 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 Markus Gruber

How did the fund perform in that environment?

Despite a challenging market environment with high volatility, ERSTE FAIR INVEST achieved positive performance in the first half of 2025. The strategic focus on European equities had a particularly positive effect. Contrary to the trend of recent years, these performed significantly better than the US market, especially in the first two months of the year. On the other hand, Trump's protectionist trade policy had a negative impact, leading to a rapid market correction in April. However, thanks to a partial easing of tariff policy, the fund largely recovered the losses in May. The appreciation of the euro against the US dollar represented a slight performance disadvantage to euro investors.

 

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

In view of the increased uncertainty and market volatility, we made targeted adjustments to the portfolio. We expanded the exposure to European equities, as these appeared more attractive in terms of both geopolitics and valuation. At the same time, we reduced the weighting in consumer cyclicals, as these were/are more sensitive to economic fluctuations. Instead, we gave defensive business models greater consideration, as they tend to perform more stably in volatile market phases.

 

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 latest economic data from the USA paints a positive picture: inflation remained below expectations for the fourth month in a row, and the labour market continues to be robust. A short-term slowdown in the US economy is therefore not expected. The monetary policy developments remain exciting, especially against the backdrop of political influence from Trump, who is calling for interest rate cuts and putting pressure on the US Federal Reserve.

In Europe, there are signs of a gradual economic recovery, which could receive additional tailwinds from the new infrastructure package in Germany. The situation in China, however, remains uncertain: despite political measures, current data point to a deflationary environment that could continue to weigh on the economy. Overall, the fund management team expects the market environment to remain volatile and to be driven by geopolitical tensions and economic uncertainty.

 

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

Given the level of ongoing uncertainty, the fund strategy remains cautious and flexible. We will continue to consistently pursue the measures introduced. The forecasts for earnings growth remain solid, and possible interest rate cuts in the USA and a recovery in Chinese consumption could provide additional momentum. At the same time, the fund management team will closely monitor potential risks – in particular geopolitical developments and inflation and labour market data – and react quickly if necessary. The goal remains to achieve stable and sustainable returns even in a challenging environment.

 

Please note: investing in securities involves risks as well as opportunities and forecasts are no reliable indicator of future performance.

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