Portfolio Manager Update

Market view

State: 01 July 2025

Once again, the past month was marked by complex tensions between ongoing political uncertainty and impressive market strength. Remarkably resilient, the markets weathered the rapidly escalating and then de-escalating conflict in the Middle East. In contrast to their European counterparts, the US markets climbed to new all-time highs. While the performance gap that had emerged over the course of the year could not be closed, it was narrowed somewhat.

9 July continues to loom large over the markets like the sword of Damocles, as this is when the 90-day deadline set by the US President will expire. So far, the number and scope of deals concluded are very modest, and from the US's perspective, still unsatisfactory. Although the Americans secured a commitment from the other members to increase spending at the NATO summit, this only represents part of their demands. We fear a renewed escalation of the tariff situation if there are no further tangible results for the US. It is doubtful that President Trump will want to be associated with the acronym TACO (Trump Always Chickens Out) again.

Fiscal plans have been finalised in Germany. In the US, the 'Big Beautiful Bill' has also now passed the Senate, but still requires approval from the House of Representatives. Like the market, we are sceptical about the scope and finalisation of the bill. The likelihood of interest rate cuts in the US has increased. The ECB has made its eighth and final interest rate cut for the time being, while the Fed is expected to cut rates at least twice in 2025 and twice more in 2026. This decision will depend heavily on the outcome of the tariff debate and the resilience of the economy.

This seasonal statistic is encouraging: the S&P 500 has posted gains every July since 2015. Let's see what this July has in store for us.

Ethna-DEFENSIV

State: 30.06.2025

Key points at a glance

• The Ethna-DEFENSIV (T) increased by 0.06% in June (YTD: 1.80%).
• Extension of the bond portfolio's duration: Targeted purchase of new issues with 5–8-year maturities offering attractive risk/return profiles and better entry opportunities. At the same time, shorter-term positions (1–4 years) were sold.
• Higher long-term yields: The current higher yields on longer maturities are attractive and are supported by stable inflation prospects and robust issuers.
• Modified duration: The modified duration of the portfolio increased to 6.49.

Bond strategy

Last month, we actively extended the maturities in our portfolio. We started purchasing longer-term bonds in May. This strategy continued in June, albeit at a reduced volume. We specifically targeted new issues with maturities of five to eight years, as these offered attractive risk/return profiles and favourable entry opportunities. At the same time, we sold off shorter-term positions (1–4 years).

These adjustments resulted in a slight increase in the modified duration of the bond portfolio, bringing it to 6.49. As we closed the future overlay during the month, the overall duration decreased slightly compared with the previous month. We believe that the higher yields currently available on longer maturities represent an attractive investment opportunity. The inflation outlook appears stable, which should ease pressure on government bond yields. Additionally, the robust business models of the issuers in our portfolio make a significant widening of credit spreads unlikely. The increase in the bond portfolio's duration partially offset the reduction from the closed futures overlay.

The performance since the beginning of the year for DEFENSIV is 1.80%.

Ethna-AKTIV

State: 30.06.2025

Key points at a glance

• Ethna-AKTIV (T) gained by 1.01% in June.
• The bond allocation increased to 60.8%. The average rating is between A- and A.
• The modified duration is 7.9. There is currently no overlay.
• The net equity allocation was reduced from 33.7% to approximately 30.5% over the course of the month. Following the escalation in Iran, an additional risk-minimising reduction was made, which was immediately reversed.
• The portfolio's current currency risk stands at 6.1% (3.1% USD, 0.9% GBP and 2.1% CHF).

Equity strategy

We remain positive about equities as an asset class. Although the S&P 500 is currently trading at a price-to-earnings (P/E) ratio of around 22 (the DAX is already at around 15) for the next twelve months, we anticipate further growth. We assume that, along with the growth data for the economy, profit growth is also still being underestimated. Fiscal and monetary policy are currently providing support. The main risk is an escalating tariff dispute, which could have implications for inflation, growth and corporate earnings. The net allocation has changed little compared with last month. As planned, it was reduced slightly to a neutral level of 30.5% during the rally.

During the month, we proactively responded to the escalation in the Middle East as a purely risk management measure. Having previously increased the quota to almost 37%, we reduced it to around 26% by selling the existing Eurostoxx future and Topix ETF. The current target quota was achieved immediately after the ceasefire through purchases of individual stocks.

Bond strategy

There were only two noteworthy changes to the bond portfolio. Once the target duration had been achieved through corresponding reallocations, the duration overlay was dissolved. Due to the escalating geopolitical situation, a 10% position in US government bonds was built up for diversification purposes. We sought exposure to both the US dollar and duration. Despite the de-escalation, we are retaining these securities but hedging the currency. The modified duration of the portfolio is now 7.9. Quality remains high. Due to the historically low credit spreads, we are unwilling to compromise.

Currency strategy

In our view, the US dollar remains under pressure. We have therefore reduced our exposure to it, leaving a residual allocation of 3.1%. This allocation was temporarily increased to 10% during the month. The positions in pounds and yen, which were used for diversification, were reduced at a profit to 0.9% and 0%, respectively. The 2.1% allocation to Swiss francs remains unchanged.

Ethna-DYNAMISCH

State: 30.06.2025

Key points at a glance

• Ethna-DYNAMISCH (T) gained by 2.00% in June.
• The net equity exposure increased from around 70% to 78.2% over the course of the month.
• Dynamisation of the product through replacing some equities has been completed.
• Currently, 22.2% of the fund is invested in cash-like bonds. The cash ratio is currently 1.7%.

Equity strategy

The fund is now more dynamically positioned by purchasing higher-growth stocks. In response to the escalation in the Middle East, the net allocation, which had been rapidly increased to 70%, was reduced to 60% via futures. Following the ceasefire, the futures were closed out and additional individual stocks were purchased. By the end of the month, the allocation had increased to 78.2%.

Bond strategy

The bond portfolio currently accounts for 22.2% of the total portfolio and is invested in short-term, high-quality securities to stabilise the portfolio and provide liquidity for opportunistic equity purchases.

Currency strategy

We are sticking to our strategy of not hedging currency risks, except for the US dollar. Typically, the amounts involved are low single-digit percentages per currency pair.

Following the Iran crisis, the US dollar allocation, which had previously been reduced to 15%, was increased to 30%. Following the de-escalation in the Middle East, this allocation was immediately reduced to 19.2%.

The dollar remains under pressure. In addition to the expected decline in interest rate differentials, the repatriation of foreign investments is likely to exacerbate its weakness.