The ERSTE RESPONSIBLE STOCK GLOBAL is a sustainable equity fund that invests mainly in the shares of selected companies in the developed markets. The investment process of the fund is based on fundamental company research. We prefer companies of high quality and with strong growth rates, and prioritise companies that are ESG pioneers in our investment decision-making process.
Turbulent first half year on the markets
The sentiment on the equity and bond markets was clearly down in the first half of 2022. Numerous factors are driving the current affairs at the moment. For example, inflation has increased significantly since the end of last year, which led the central banks like the Federal Reserve in the USA and the European Central Bank (ECB) to take action. In reaction to the drastic increase in inflation, the central banks tightened their monetary policy and heralded the end of low interest rates. The Ukraine war and increasing geopolitical tensions are also burdening share and bond prices.
The situation created by these three factors has increasingly led to concerns about economic growth, which is also reflected in the economic data. The development of the market environment in the second half of 2022 should therefore depend crucially on the path of inflation. Due to strong base effects, experts suggest that inflation might peak in autumn. The development of the Ukraine war from here on out will also remain an uncertainty factor for the rest of the year. Given this context, the risk of a recession is particularly high in Europe at this point in time.
For more information on a regular basis, please visit the investment blog of Erste Asset Management. Here, you can find not only articles and comments on the status quo of the market, but also interviews with experts of Erste Asset Management and interesting facts about funds and investments.
In the exclusive interview below about the first half of 2022, fund manager Christoph Vahs talks about his assessment of the YTD performance of the fund and his outlook for the coming months.
Interview with fund manager Christoph Vahs
What sort of performance did the fund achieve in the first half of 2022?
The high inflation rates in most developed countries led to the first interest rate hikes by various central banks in the first half of the year and thus to the end of the ultra-loose monetary policy. Also, the Ukraine war created additional uncertainty and a drastic increase in energy prices. In this difficult market environment, ERSTE RESPONSIBLE STOCK GLOBAL has failed to buck the trend on the international equity markets and has performed negatively in the year to date.
How is ERSTE RESPONSIBLE STOCK GLOBAL currently positioned? What is your focus in this fund?
In terms of sectors, we slightly reduced technology and further stepped up healthcare, the industrial sector, and real estate. In recent months, we have increased the allocation of renewable energies, as a result of which they now account for slightly more than 5% of assets under management. In particular, we expanded our positions in Sunrun, Shoals, Sunnova, and Plug Power at low levels and newly invested in a promising company in the alternative energy sector, i.e. Otovo, which should benefit from the REPowerEU plan.
„We focus on companies in renewable energies, healthcare, the industrial sector, and real estate.”
Christoph Vahs, fund manager ERSTE RESPONSIBLE STOCK GLOBAL
The technology sector retains the biggest weighting in the fund. Our top holdings, i.e. Apple and Microsoft, should be in a good position to weather any turbulences due to their ability to dictate prices.
Our quarterly audits on the basis of our sustainability criteria resulted in a number of exclusions from the investable universe. In March 2022, we had to sell the banks JP Morgan and Royal Bank of Canada, since they did not fulfil the sustainability criteria any longer. In June, we also had to sell Starbucks for the same reason.
What is the outlook for the fund in the coming months?
The general macro-economic and market environment makes predictions difficult. That being said, the environment of high inflation, the worldwide action taken by central banks against inflation, the still uncertain situation of the supply chains, possible Covid-19 problems, and the ongoing conflict between Ukraine and Russia suggest a challenging second half of 2022.
We think that the war in Ukraine has sped up the trend towards new and renewable forms of energy, and we believe that we are in a good position in this context. Also, our weighting in the defensive healthcare sector, which is now higher than it was at the beginning of the year, should help us navigating (more) difficult market conditions. Since we can see substantially bigger economic problems in Europe (e.g. given the Ukraine war), our country allocation – with a strong focus on North America should also offer some protection.
Important legal note:
Past performance is not a reliable indicator of an investment’s future performance.