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
- Although the market is dominated by headlines, the sustained strong trend in company earnings is continuing.
- We are focusing on trends that will remain independent of the economic environment. These include rising energy demand from data centres and electromobility, as well as outdated infrastructure in the water sector, the urgent need to expand power grids, and the necessary transition to a circular economy.
- We have increased our allocation to energy utilities that generate a large proportion of their profits in their domestic markets and are less dependent on tariffs.
- We have also stepped up our exposure to the water, recycling, and adaptation segments, which tend to have more defensive characteristics.
Fund manager Alexander Weiss
(c) Stephan Huger
Fund & Performance
ERSTE GREEN INVEST invests worldwide primarily in companies in the field of environmental technology. The investment process of the fund is based on fundamental company analysis. Furthermore a measurable positive impact on the environment or society is paramount in the investment decision making. The selection of stocks takes place with a focus on companies in which an environmental benefit could be identified and which are primarily active in the areas of water treatment and -supply, recycling and waste management, renewable energy, energy-efficiency, mobility, transformation and adaption.
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 (3.8.2020). 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 managers
Clemens Klein and Alexander Weiss
What are the expectations of your fund management team with regard to global economic development and trends, among other things, for the second half?
So far, 2025 has been driven primarily by politics. After “Liberation Day,” when Trump announced absurdly high tariffs on the rest of the world, the markets went into free fall. Although a 90-day pause led to a recovery, volatility remains high and global investors are rethinking their allocations in the United States. The US dollar has depreciated sharply, and bond market yields have risen significantly since Liberation Day.
Although the market is dominated by headlines, the sustained strong trend in company earnings is ongoing. Companies in the clean tech segment also reported encouraging results. However, uncertainty about the future of the Inflation Reduction Act (IRA), which is so important for this sector, caused additional volatility. In this environment, the fund has performed slightly negatively to date, but somewhat better than the broad market.
Political uncertainty will remain high in the second half of the year. The unpredictable and erratic policies of US President Donald Trump make it impossible to make reliable forecasts about economic developments in the remainder of 2025. Added to this is the continuing tense situation in the Middle East, which threatens to escalate further as a result of Israel's surprise attack on Iran and is leading to rising oil prices, which in turn is putting additional strain on the economy. We are therefore focusing on trends that will remain independent of the economic environment. These include rising energy demand from data centres and electromobility, as well as outdated infrastructure in the water sector, the urgent need to expand power grids, and the necessary transition to a circular economy.
What are your priorities in the fund, based on your expectations?
Our segment was unable to escape the market turmoil, with Trump's policies also having an impact on our segment. Although tariffs are nothing new for most companies in the solar sector – the strategic battle between the USA and China has been raging here for some time – the subsidies introduced in the United States under the Inflation Reduction Act are much more relevant for these companies. Trump wants to abolish at least some of these subsidies, and the exact extent and speed of this is currently being negotiated. This uncertainty is weighing on shares in the energy sector, which still accounts for just under 55% of the fund’s assets under management. In second place is the transformation segment, which currently accounts for around 17% of the fund, followed by water (10%), adaptation (9%), and waste & recycling (7.3%).
Since the tariffs were announced, we have gradually reduced our allocation to cyclicals and increased our weighting in more defensive segments. We have stepped up our allocation to energy utilities, which generate a large proportion of their profits in their domestic market and are less dependent on tariffs. Also, we have raised our exposure to the water, recycling, and adaptation segments, which tend to come with more defensive characteristics.
Please note: investing in securities involves risks as well as opportunities.
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