Erste Asset Management

Light and shadow

Light and shadow

The environment has become a bit brighter in the past weeks.

In addition to the improvement of the economic environment in the Eurozone and Japan, more and more central banks loosened their monetary policies. For example, on 12 February the central bank of Sweden (Riksbank) surprisingly cut its key-lending rate to -0.1% and announced to buy small volumes of government bonds. The reason behind this measure is the same as for similar steps taken by other central banks: the risk of falling short of the inflation target has increased. The markets reacted in a textbook-fashion with falling yields and a depreciating currency (krona). Both are supportive to the economy. On the financial markets the continuously falling and partially even negative yields of government bonds have pushed investors into securities with a higher expected yield (bonds with longer maturities, bonds with a higher default risk, bonds in foreign currencies, shares).

In addition, the oil price has stabilised after the strong decline in the past months. This helps those asset classes that have recently come under pressure such as for example corporate bonds with low ratings in the USA.

On the downside, it is mainly four developments that have started drawing investors’ attention:

  1. The conflict of the West and Ukraine with Russia: at the very least, an armistice has been reached. Also, Ukraine will receive further financial aid from the West if it makes structural reforms a top priority.
  2. The conflict of Greece with the troika (EU Commission, European Central Bank, and International Monetary Fund). It seems like we are heading for a last-minute showdown. Greece rejects both the current bailout-programme, which includes austerity measures, and the troika, and does not want to pay back the part of debt that is held by the public sector in full. The troika, on the other hand, does not see much need for adjustments and insists on austerity and structural reforms.
  3. The increased probability of an increase in the Fed funds rate in the USA due to the solid growth of the economy and the significant rise in employment. A surprising rate hike could have negative short-term effects on the global economy and the financial market.
  4. A further deterioration of the outlook for global economic growth in Latin America. The consensus expects an economic growth rate of only 0.8% y/y for the region in 2015. The focus is on Brazil: the high budget deficit forces the government to impose austerity measures, the high inflation forces the central bank to increase key-lending rates, the falling commodity prices have curtailed income, and the currency is overvalued.

Overall the supporting factors have increased for risky asset classes. However, the risks remain elevated.

Equity weighting remains unchanged
The equity weighting remains unchanged from last month in spite of the fact that the assessment of the equity markets has deteriorated slightly.

In fixed income, the fund management team reduced the money market allocation and instead stepped up the weighting of US corporate bonds with good and very good ratings. US high-yield bonds and global government bonds were newly taken into the portfolio.

Overall the environment for financial markets has become a bit brighter, but the risk remains elevated (please refer also to Gerhard Winzer’s article).


Legal disclaimer

This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. The language of communication of the sales offices is German and the languages of communication of the Management Company also include English.

The prospectus for UCITS funds (including any amendments) is prepared and published in accordance with the provisions of the InvFG 2011 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in conjunction with the InvFG 2011.

The currently valid versions of the prospectus, the Information for Investors pursuant to § 21 AIFMG, and the key information document can be found on the website under “Mandatory publications” and can be obtained free of charge by interested investors at the offices of the Management Company and at the offices of the depositary bank. The exact date of the most recent publication of the prospectus, the languages in which the key information document is available, and any other locations where the documents can be obtained are indicated on the website A summary of the investor rights is available in German and English on the website and can also be obtained from the Management Company.

The Management Company can decide to suspend the provisions it has taken for the sale of unit certificates in other countries in accordance with the regulatory requirements.

Note: You are about to purchase a product that may be difficult to understand. We recommend that you read the indicated fund documents before making an investment decision. In addition to the locations listed above, you can obtain these documents free of charge at the offices of the referring Sparkassen bank and the offices of Erste Bank der oesterreichischen Sparkassen AG. You can also access these documents electronically at

N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated. Our analyses and conclusions are general in nature and do not take into account the individual characteristics of our investors in terms of earnings, taxation, experience and knowledge, investment objective, financial position, capacity for loss, and risk tolerance.

Please note: Past performance is not a reliable indicator of the future performance of a fund. Investments in securities entail risks in addition to the opportunities presented here. The value of units and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.

We are not permitted to directly or indirectly offer, sell, transfer, or deliver this financial product to natural or legal persons whose place of residence or domicile is located in a country where this is legally prohibited. In this case, we may not provide any product information, either.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to § 21 AIFMG for restrictions on the sale of the fund to American or Russian citizens.

It is expressly noted that this communication does not provide any investment recommendations, but only expresses our current market assessment. Thus, this communication is not a substitute for investment advice, does not take into account the legal regulations aimed at promoting the independence of financial analyses, and is not subject to a prohibition on trading following the distribution of financial analyses.

This document does not represent a sales activity of the Management Company and therefore may not be construed as an offer for the purchase or sale of financial or investment instruments.

Erste Asset Management GmbH is affiliated with the referring Sparkassen banks and Erste Bank.

Please also read the “Information about us and our securities services” published by your bank.

Subject to misprints and errors.

Share post:
Exit mobile version