After a difficult year of 2022 on the markets, many asset classes saw rebounding performances in 2023. While the central banks' turnaround on interest rates ensured a “return to normality” on the bond market, the focus on the equity market was primarily on technology companies. In the Funds exclusive series, the fund managers of selected funds look back on developments of the previous year and give their assessment of what the markets could expect in 2024. (Note: Prognoses are not a reliable indicator of future performance.)

Fund & Performance

The ERSTE EQUITY RESEARCH is an equity fund that invests worldwide in the form of a concentrated portfolio. The fund selection is based on the publicly accessible recommendation list of Erste Group Research. Primarily, companies with a "BUY" rating on the recommendation list are considered for investment.

Note: Past performance is not a reliable indicator of future performance.

Performance since start of the fund. 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 Harald Egger

How did the fund perform in 2023?

ERSTE EQUITY RESEARCH closed 2023 in positive territory (+12.7%) without any significant correction phases.

 

What was the focus of the fund in the previous year?

The fund invests in companies that are analysed by Erste Group Bank's research department. This combines the comprehensive equity expertise of Erste Group Bank with the know-how of Erste Asset Management. In principle, the fund emphasises quality, steady earnings growth, and good momentum (Note: Please note that an investment in securities entails risks in addition to the opportunities described).

Accordingly, we placed the focus on the IT (information technology) and healthcare sectors. The IT sector benefited above all from the euphoria generated by Chat GPT in the AI (artificial intelligence) segment. Companies with a strong connection to AI, such as Nvidia or Microsoft, benefited above average. In the healthcare sector, companies such as Eli Lilly and Novo Nordisk, whose weight loss drugs were in high demand, excelled.

Note: The companies listed here have been selected as examples and do not constitute an investment recommendation. In the context of active management, the portfolio positions mentioned may change at any time. There is no guarantee that securities will be permanently included in the portfolio.

We added values shares from finance and energy to the largely growth-driven portfolio.

We underweighted defensive sectors such as utilities and non-cyclical consumer goods, which were disproportionately negatively impacted by rising interest rates.

 

What are your expectations for the market year 2024?

We regard the the probability of a recession or, at best, a soft landing as relatively high for 2024. Inflation will remain above the central banks' target, and interest rates will remain high compared to the recent past. This is the basic scenario with which the fund management team is starting the new year. The fund is positioned accordingly:

  • We will avoid highly cyclical companies in this environment.
  • However, financial companies from the value segment could continue to perform favourably. 
  • We will consider the oil and gas sector depending on the performance of commodities, with fund management acting swiftly as and when.
  • High quality will continue to prevail, as these companies can hold their own even in a difficult economic environment.
  • Interest rate-sensitive companies and those that have suffered from the sharp rise in interest rates in 2023, could be fundamentally attractive and may be included in the fund.

Note: Please note that an investment in securities entails risks in addition to the opportunities described.

However, we should like to emphasise that the assessment may change over the course of the year. Research and fund management teams regularly exchange views and reassess the situation accordingly, which can have a significant impact on the fund composition. Due to the strategy, this fund may also experience relatively high turnover activity in, as was already the case in 2023. The actively managed fund focuses on the world's 50 best ideas, which sets it apart from highly diversified products.

ERSTE EQUITY RESEARCH

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. Unless indicated otherwise, source: Erste Asset Management GmbH. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art  21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011. The fund prospectus, Information for Investors pursuant to Art  21 AIFMG, and the Key Information Document can be viewed in their latest versions at the website www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the website www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.