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

  • Uncertainty surrounding trade policy, international monetary policy developments, and geopolitics is likely to remain high, as will their macroeconomic impact.
  • Following the widening in April, spreads have recovered and are back at historically low levels.
  • The second half of the year is likely to be volatile and present opportunities for active portfolio managers.

Fund manager Hannes Kusstatscher
(c) Samuel Kreuz

Fund & Performance

The ERSTE RESPONSIBLE BOND GLOBAL HIGH YIELD is a bond fund whose investment universe is composed according ethical and sustainable criteria. Primarily, the fund invests in high-yield corporate bonds denominated in EUR, GBP or USD. Foreign currency risks are hedged on a strategic basis in most cases. The rating is primarily in the high-yield range (BB and lower). 

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 (11.5.2020). 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 manager Hannes Kusstatscher

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

In the first two months of 2025, global high-yield bonds achieved a positive euro-hedged total return of about 1.7%, reflecting the prevailing market optimism at the start of Trump's second term as US president. However, the increasingly confrontational stance taken by the new US administration in March and the first week of April on trade and tariffs triggered a market downturn, leading to losses of over 3% for global high-yield bonds. The 90-day suspension of many of the newly introduced tariffs ended the market turmoil. The decline in global high-yield bond prices was reversed, and by the end of May, global high-yield bonds had recorded a euro-hedged total return of about 2.1% since the beginning of the year.

 

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

The fund invests in high-yield corporate bonds denominated in USD, EUR, and GBP from developed markets. Accordingly, bonds from issuers in the cyclical consumer, communications, and industrial sectors accounted for the largest positions in the fund. In terms of geographical allocation, North America and Western Europe made up the largest share, with the United Kingdom and France representing the largest individual positions within Western Europe.

 

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

Uncertainty surrounding trade policy, international monetary policy developments, and geopolitics is likely to remain high, as will their macroeconomic impact. On the other hand, strong demand for higher-yielding debt securities, combined with moderate net supply from new issues, is expected to support the asset class.

 

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

Following the widening in April, spreads have recovered and are back at historically low levels. In this environment, we reduced the fund's risk positioning to a largely neutral level. The second half of the year is likely to be volatile and present active portfolio managers with opportunities. The fund will continue to seek opportunities with a favourable risk/return profile in order to invest capital in global high-yield markets.

 

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

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