Portfolio Manager Update
Market view
State: 31.05.2025
Despite – or perhaps precisely because of – the ongoing uncertainty and high scepticism, the markets continued the risk-on rally that began in the previous month. Some of the major stock indices are now trading well above the levels seen before the escalation of the tariff dispute on Liberation Day.
Against the backdrop of considerable uncertainty, this seems contradictory. After all, the global economy is facing massive changes in trade policy. However, it is not unusual for fundamentals to lag behind price movements.
On a positive note, even the dispute between the US and China has eased significantly and tariffs have been reduced.
In the US, there has been a clear shift in perspective on two levels. On the one hand, the US government has moved from an uncompromising tariff policy to one that is open to negotiation. On the other hand, it no longer intends to tackle its own debt problem with politically unpopular deficit reduction measures, but rather through higher economic growth. In our view, long-term US interest rates are contributing significantly to this change of direction because, unlike European interest rates, they are continuing to rise.
Added to this is the persistent discrepancy between so-called hard and soft data. However, there is still a good chance that the delayed ‘hard’ economic data will not follow the rather poor forecast picture painted by the ‘soft’ survey data.
The US Federal Reserve has clearly come to a similar conclusion. Unlike its European counterpart, however, the Fed has postponed its next interest rate cut. Even the ECB is likely to adopt an observational approach for the time being after another interest rate cut in June.
Ethna-DEFENSIV
State: 31.05.2025
Key points at a glance
- Extension of the bond portfolio's duration: Targeted purchase of new issues (5-8 years) for attractive risk/return profiles and better entry opportunities.
- Higher long-term yields with stable inflation and robust issuers appear attractive.
- Duration overlay halved: reduction in the Bund overlay contribution, duration contribution from overlay fell from 0.9 to around 0.4.
Bond strategy
In the previous month, we actively extended the maturities in our bond portfolio. We purchased new issues with maturities of 5–8 years as these offered an attractive balance of risk and return.
Access to these new issues presented advantageous entry opportunities that are often unavailable to individual investors. At the same time, we sold off shorter-term positions (1–4 years).
These changes led to an increase in the portfolio's modified duration from 5.7 to 6.6. We believe that the higher yields currently available on longer maturities represent an attractive investment opportunity.
The outlook for inflation appears stable, which should ease the pressure on government bond yields. Additionally, the robust business models of the issuers in our portfolio make a significant widening of credit spreads unlikely.
To counteract the increase in portfolio duration, we halved our duration overlay on Bund futures simultaneously. This reduced the overlay's contribution to the overall duration from 0.9 to approximately 0.4.
Consequently, the overall portfolio duration was approximately 7 at the end of the month. Performance since the beginning of the year stands at around 1.74%.
Ethna-AKTIV
State: 31.05.2025
Key points at a glance
- The Ethna-AKTIV (T) gained 3.04% in May.
- The bond allocation remained almost unchanged at 50.5%. The average rating is A- to A.
- A long position in Bund futures increased the modified duration from 7.3 to 9.
- The net equity allocation increased from 30.7% to over 44% during the month before reducing back to 33.3% towards the end of the month through both futures and equity sales.
- The portfolio's currency risk currently stands at 10.9% (5.5% GBP, 0.7% USD, 2.6% JPY and 2.1% CHF).
Equity strategy
During the sustained rally, net exposure was raised very quicly from just under 30% to over 44%. Towards the end of the month, however, it was reduced again, this time to 33.3%. Unlike the previous month, the gross ratio fell to 29.2%.
In addition to NVIDIA, which grew in weight to 4.5% due to price gains, smaller, high-beta technology stocks were mainly sold. Only three Mag7 stocks are represented in the portfolio (Alphabet, Microsoft and NVIDIA), accounting for 6.8% together.
We currently see attractive potential in financial stocks and luxury goods providers. The single-stock portfolio remains heavily weighted towards the US and is supplemented with index exposure in the Eurostoxx 50 (4.9%) and Topix (2.6%).
Looking ahead, we anticipate a broad trading range in the market. We therefore consider it sensible to opportunistically build up and reduce exposure at the margins.
Our motto for the time being is 'buy the dip' and 'sell the rally' to a moderate extent, based on the fundamentals of a solid portfolio.
Bond strategy
The allocation to US bonds was reduced by a further 7% in favour of European securities. As a result, the bond allocation fell slightly from 51.3% to 50.5%. The modified duration of the portfolio is 7.3 and is increased to 9 via the duration overlay.
We continue to expect interest rates to fall in Europe. Easing inflationary pressure and modest economic growth are the main arguments in favour of this view.
We switched from US interest rate futures to Bund futures last month. The opposite movement of interest rates on both sides of the Atlantic once again justifies this move.
In our view, it is not attractive to take on more risk now that credit spreads have converged again and are close to historic lows.
Currency strategy
We are sticking to our guns: we are reducing US dollar risk by selling US equities and bonds on the one hand and hedging the remaining exposure on the other.
We are not alone in this view, which will continue to weigh on the dollar in the near term. Diversified positions in the pound (5.5%), yen (2.6%) and Swiss franc (2.1%) remain unchanged.
Ethna-DYNAMISCH
State: 31.05.2025
Key points at a glance
- The Ethna-DYNAMISCH (T) fund gained 2.35% in May.
- The net equity allocation increased from around 60% to 70% over the course of the month before falling back to 61.9% at the end of the month due to the sale of equities.
- A long-planned dynamisation of the product is currently taking place through the replacement of some equities.
- Approximately 23.1% of the fund is currently held in cash-equivalent bonds. The cash ratio is currently 14.2%. This sum will be reduced back to 30% in the near future through share purchases.
Equity strategy
There are two changes worth noting. First, the 10% hedge was unwound relatively quickly. This turned out to be the right move given the easing of trade tensions.
Second, the underlying equity portfolio was dynamised as planned. Replacing a number of stocks has resulted in a refocus on companies with stronger growth.
This process will be completed by the end of June. By the end of the month, the gross allocation stood at 61.9%. However, this will be increased relatively quickly to at least 70% through additional purchases.
The net ratio will continue to be managed via index futures. It currently stands at 61.9% as we are exercising caution due to the rapid upward movement and ongoing macroeconomic risks.
Bond strategy
Adjustments to the equity portfolio have freed up capital, which has been invested in short-term German government bonds. Consequently, the bond portfolio has grown to 23.1%.
The short maturity of the bonds and the issuers (KfW, EIB and the German government) guarantee that this portfolio is highly liquid and virtually free of default risk.
Alongside the 14% cash ratio, this ensures that future equity purchases can be made immediately.
Currency strategy
We are sticking to our strategy of not hedging currency risks except for the US dollar. As a rule, the amounts involved are low single-digit percentages per currency pair.
The situation is different for the US dollar. The invested exposure here is over 35% and is hedged at a level of 15%. We assume that the greenback's weak phase is not yet over.
The repatriation of foreign capital investments from the US and, not least, the US government's talk of its own currency's weakness should continue to provide headwinds for the US dollar.
The content of this page is intended for professional investors only.
Please contact us at any time if you have questions or suggestions.
ETHENEA Independent Investors S.A.
16, rue Gabriel Lippmann · 5365 Munsbach
Phone +352 276 921-0 · Fax +352 276 921-1099
info@ethenea.com · ethenea.com
This is a marketing communication. It is for product information purposes only and is not a mandatory statutory or regulatory document. The information contained in this document does not constitute a solicitation, offer or recommendation to buy or sell units in the fund or to engage in any other transaction. It is intended solely to provide the reader with an understanding of the key features of the fund, such as the investment process, and is not deemed, either in whole or in part, to be an investment recommendation. The information provided is not a substitute for the reader's own deliberations or for any other legal, tax or financial information and advice. Neither the investment company nor its employees or Directors can be held liable for losses incurred directly or indirectly through the use of the contents of this document or in any other connection with this document. The currently valid sales documents in German (sales prospectus, key information documents (PRIIPs-KIDs) and, in addition, the semi-annual and annual reports), which provide detailed information about the purchase of units in the fund and the associated opportunities and risks, form the sole legal basis for the purchase of units. The aforementioned sales documents in German (as well as in unofficial translations in other languages) can be found at www.ethenea.com and are available free of charge from the investment company ETHENEA Independent Investors S.A. and the custodian bank, as well as from the respective national paying or information agents and from the representative in Switzerland. The paying or information agents for the funds Ethna-AKTIV, Ethna-DEFENSIV and Ethna-DYNAMISCH are the following: Austria, Belgium, Germany, Liechtenstein, Luxembourg: DZ PRIVATBANK S.A., 4, rue Thomas Edison, L-1445 Strassen, Luxembourg; France: CACEIS Bank France, 1-3 place Valhubert, F-75013 Paris; Italy: State Street Bank International – Succursale Italia, Via Ferrante Aporti, 10, IT-20125 Milano; Société Génerale Securities Services, Via Benigno Crespi, 19/A - MAC 2, IT-20123 Milano; Banca Sella Holding S.p.A., Piazza Gaudenzio Sella 1, IT-13900 Biella; Allfunds Bank S.A.U – Succursale di Milano, Via Bocchetto 6, IT-20123 Milano; Spain: ALLFUNDS BANK, S.A., C/ Estafeta, 6 (la Moraleja), Edificio 3 – Complejo Plaza de la Fuente, ES-28109 Alcobendas (Madrid); Switzerland: Representative: IPConcept (Schweiz) AG, Münsterhof 12, Postfach, CH-8022 Zürich; Paying Agent: DZ PRIVATBANK (Schweiz) AG, Münsterhof 12, CH-8022 Zürich. The paying or information agents for HESPER FUND, SICAV - Global Solutions are the following: Austria, Belgium, France, Germany, Luxembourg: DZ PRIVATBANK S.A., 4, rue Thomas Edison, L-1445 Strassen, Luxembourg; Italy: Allfunds Bank S.A.U – Succursale di Milano, Via Bocchetto 6, IT-20123 Milano; Switzerland: Representative: IPConcept (Schweiz) AG, Münsterhof 12, Postfach, CH-8022 Zürich; Paying Agent: DZ PRIVATBANK (Schweiz) AG, Münsterhof 12, CH-8022 Zürich. The investment company may terminate existing distribution agreements with third parties or withdraw distribution licences for strategic or statutory reasons, subject to compliance with any deadlines. Investors can obtain information about their rights from the website www.ethenea.com and from the sales prospectus. The information is available in both German and English, as well as in other languages in individual cases. Producer: ETHENEA Independent Investors S.A.. Distribution of this document to persons domiciled in countries in which the fund is not authorised for distribution, or in which authorisation for distribution is required, is prohibited. Units may only be offered to persons in such countries if this offer is in accordance with the applicable legal provisions and it is ensured that the distribution and publication of this document, as well as an offer or sale of units, is not subject to any restrictions in the respective jurisdiction. In particular, the fund is not offered in the United States of America or to US persons (within the meaning of Rule 902 of Regulation S of the U.S. Securities Act of 1933, in its current version) or persons acting on their behalf, on their account or for the benefit of a US person. Past performance should not be taken as an indication or guarantee of future performance. Fluctuations in the value of the underlying financial instruments or their returns, as well as changes in interest rates and currency exchange rates, mean that the value of units in a fund, as well as the returns derived from them, may fall as well as rise and are not guaranteed. The valuations contained herein are based on a number of factors, including, but not limited to, current prices, estimates of the value of the underlying assets and market liquidity, as well as other assumptions and publicly available information. In principle, prices, values, and returns can both rise and fall, up to and including the total loss of the capital invested, and assumptions and information are subject to change without prior notice. The value of the invested capital or the price of fund units, as well as the resulting returns and distribution amounts, are subject to fluctuations or may cease altogether. Positive performance in the past is therefore no guarantee of positive performance in the future. In particular, the preservation of the invested capital cannot be guaranteed; there is therefore no warranty given that the value of the invested capital or the fund units held will correspond to the originally invested capital in the event of a sale or redemption. Investments in foreign currencies are subject to additional exchange rate fluctuations or currency risks, i.e. the performance of such investments also depends on the volatility of the foreign currency, which may have a negative impact on the value of the invested capital. Holdings and allocations are subject to change. The management and custodian fees, as well as all other costs charged to the fund in accordance with the contractual provisions, are included in the calculation. The performance calculation is based on the BVI (German federal association for investment and asset management) method, i.e. an issuing charge, transaction costs (such as order fees and brokerage fees), as well as custodian and other management fees are not included in the calculation. The investment performance would be lower if the issuing surcharge were taken into account. No guarantee can be given that the market forecasts will be achieved. Any discussion of risks in this publication should not be considered a disclosure of all risks or a conclusive handling of the risks mentioned. Explicit reference is made to the detailed risk descriptions in the sales prospectus. No guarantee can be given that the information is correct, complete or up to date. The content and information are subject to copyright protection. No guarantee can be given that the document complies with all statutory or regulatory requirements which countries other than Luxembourg have defined for it. Note: The most important technical terms can be found in the glossary at www.ethenea.com/glossary. Information for investors in Belgium: The prospectus, the key information documents (PRIIPs-KIDs), the annual reports and the semi-annual reports of the sub-fund are available in French free of charge upon request from the investment company ETHENEA Independent Investors S.A., 16, rue Gabriel Lippmann, 5365 Munsbach, Luxembourg and from the representative: DZ PRIVATBANK S.A., 4, rue Thomas Edison, L-1445 Strassen, Luxembourg. Information for investors in Switzerland: The country of origin of the collective investment scheme is Luxembourg. The representative in Switzerland is IPConcept (Schweiz) AG, Münsterhof 12, P.O. Box, CH-8022 Zurich. The paying agent in Switzerland is DZ PRIVATBANK (Schweiz) AG, Münsterhof 12, CH-8022 Zurich. The prospectus, the key information documents (PRIIPs-KIDs), and the Articles of Association, as well as the annual and semi-annual reports, can be obtained free of charge from the representative. Copyright © ETHENEA Independent Investors S.A. (2025) All rights reserved. 08/06/2021