Portfolio Manager Update

To the latest Market Commentary

Macro and markets at a glance

State: 03/09/2026

Here’s what you should keep an eye on this month

• The global economy remains resilient, but the Middle East conflict and mounting fiscal risks are increasingly weighing on momentum
• Price pressures remain stubborn; volatile energy prices and unchanged services inflation are complicating the path back to target
• Higher real rates are putting public debt back in focus
• The ECB leans toward further rate hikes for the wrong reasons, while the Fed remains caught between a weakening labor market and persistent inflation

The global economy is in a more robust state at midyear than the headlines and weaker individual data points would suggest. Across the major economic blocs, the monetary policy gap between solid growth and unexpectedly persistent inflation is narrowing.

On the growth side, U.S. GDP growth of just 1.5% in the second quarter understates the true momentum of the economy. Negative effects from trade, swings in inventories and declining government spending are masking continued robust consumer demand and a marked pickup in business investment. Meanwhile, the eurozone surprised with quarter-on-quarter growth of 0.4%. The latest leading indicators paint an even more optimistic picture: August surveys point to the strongest U.S. economic momentum in over four years, European manufacturing continues to demonstrate resilience, and even China's purchasing managers' index turned back up.

The real inflection point, however, lies in inflation, which is upending the disinflation narrative that had prevailed until now. Rather than continuing to fall, price growth is accelerating again. In the U.S., inflation stood at 3.4% in July (core rate: 2.5%). In the eurozone, the rate climbed from 2.9% in July to 3.3% - the highest level since September 2023. The main driver is the escalating Middle East conflict, which continues to push oil and gas prices higher.

Although the FOMC left rates unchanged in July, Fed Chair Kevin Warsh signaled a possible tightening at Jackson Hole. Markets now broadly expect a rate hike on September 16. In parallel, the ECB is almost certain to raise rates on September 10 following August's inflation jump As a result, both central banks are tightening policy in the same month.

In our view, this tightening is misguided: the Fed hike would come clearly too early, and the ECB's rate move is a plain mistake.

Key conclusions:

We're seeing an unusual set of dynamics play out globally. The world's two largest developed economic blocs are growing robustly and on a broad footing. But both are picking up additional inflationary pressure from geopolitical crises and the resulting rise in energy costs. The consequence: the Fed and ECB look set to tighten in lockstep come September. China, meanwhile, is diverging from this pattern, propping up growth almost entirely through external trade in the absence of domestic demand. For markets, this translates into elevated volatility. The convergence of fresh rate hikes, ballooning fiscal deficits and geopolitical uncertainty will be the dominant driver for bond markets and risk premia in the weeks ahead and pushing what are otherwise solid growth figures into the background for now.

Asset classes

Bonds / Yields

The bond market sent a two-sided message in August. On one hand, credit spreads calmed down after the prior month's volatility, with investment-grade and high-yield bonds on both sides of the Atlantic trading back at historically tight spreads to risk-free government debt. On the other hand, it was precisely the price of those quasi-risk-free assets that drew investors' attention. Nominal yields on long-dated government bonds in the U.S., Germany and even Japan climbed to multi-year — in some cases decade — highs. Against a backdrop of relentlessly rising government debt, the bond market is demanding a higher risk premium through continuously rising real rates. The U.S. Treasury's attempt to manage the long end via buybacks fizzled out fairly quickly.

Against the backdrop of interest costs that are already too high for the U.S. federal budget's debt-service burden, it didn't help that the new Fed chair struck a fairly hawkish tone in his Jackson Hole speech and continues to withhold forward guidance. The probability of a U.S. rate hike in September is now better than a coin flip. An ECB rate hike, meanwhile, is now considered a near-certainty. Looking ahead, the key question will be whether the Fed and the U.S. Treasury — given their inherent conflict of objectives — can communicate and execute a coherent policy.

Summary/Outlook

The wait for peak rates continues. As the Treasury's actions show, even the U.S. administration has recognized the need for this. We're confident this will play out globally over the coming months. We therefore continue to favor long maturities, aiming to capture future price gains on top of attractive coupons. On the spread side, given historically tight credit spreads, the right approach is to stay conservative and prioritize high quality. We see the performance catalyst for the bond portfolio coming from falling rates.

Equities

The earnings season just concluded impressed across the board. The sell-off in AI and semiconductor stocks seen back in July was not only halted but largely reversed. Doubts about the financing and profitability of the AI boom were, for now, put to rest by company guidance. As a result, leading equity indices now trade at lower valuation multiples despite significantly higher price levels than at the start of the year. Alongside the continued supportive macro backdrop, the strong earnings growth forecast for the coming quarters is our main argument for a strategic overweight in equities within our asset allocation.

Summary/Outlook

Despite September's typically difficult seasonal pattern, we have now also raised our tactical stance on equities to "overweight." Even with the heated phase of the U.S. election campaign ahead and no end in sight to the Middle East conflict, the fundamental outlook for the coming quarters is, in our view, simply too strong to ignore. We continue to favor U.S. names.

Currencies

The U.S. dollar again eased slightly against the euro over the month. Although the probability of a rate hike has risen following Fed Chair Warsh's Jackson Hole speech, negative factors currently dominate. A new development is the U.S. Treasury's announced buyback of long-dated government bonds, initially in limited scale — which stirs concerns about yield curve control along Japanese lines. A clear trend still cannot be called.

Summary/Outlook

Should the U.S. Treasury continue or even expand its interventions in the currency market and at the long end of the yield curve, this would not only reinforce our expectation of a structurally weaker dollar but meaningfully accelerate the trend. Our core argument for this depreciation view remains the narrowing interest rate differential between the U.S. and the eurozone, which we expect to continue. This assessment is further supported by the dollar smile theory, under which a moderate global growth environment has historically worked against the U.S. currency. As we continue to expect sustained dollar weakness, we have already largely hedged the corresponding currency risk across our portfolios.

Ethna-AKTIV

State: 03/09/2026

Key points at a glance

• Positive monthly performance of 0.82% (YTD: 5.24%)
• 54.3% fixed income allocation (average rating A to A+); 2.5% cash allocation
• Modified duration: 9.9
• 42.4% gross equity allocation; increased by 8 percentage points
• 3.6% currency risk (2.1% USD; 1.1% JPY; 0.4% GBP; 0.1% CHF)

Fixed income: focused on Europe, high quality and long maturities

The bond portfolio's performance contribution remained negative in August, at -40 basis points. Coupon income wasn't enough to offset market losses driven by rising yields. That said, we still expect the next major move in the yield curve to be down rather than up — which is why we're holding the modified duration at an elevated 9.9. We're making no compromises on the strong average rating of A to A+, which delivers an attractive average yield of 4.4%. The bond allocation dipped slightly to 54.3%, with 13.1% invested in European government bonds. The share of USD-denominated bonds held steady at 2.5%.

Equities: strong earnings season provides tailwind

Second-quarter corporate earnings surprised broadly to the upside. That tailwind allowed the equity portfolio to contribute 164 basis points to performance. With guidance also revised upward and somewhat greater visibility into the future profitability of current AI investments, we further increased the equity allocation — from 34.4% to 42.4%. At the same time, we broadened the number of names held and trimmed the relative underweight to technology stocks that we had deliberately maintained over the summer. The portfolio's 31 holdings now carry an expected P/E of 17. Given the seasonally difficult month of September ahead — and above all the upcoming U.S. midterm elections — no further portfolio adjustments are planned for now.

Currencies: continued dollar weakness expected

We still see no reason to accept additional currency risk in the portfolio. Current currency risk stands at 3.6%, marginally down from 3.9% the prior month. Although 41.7% of the fund is invested in USD-denominated equities or bonds, the net USD exposure after hedging is just 2.1%. Minimal, unhedged positions remain in Japanese yen (1.1%), British pound (0.4%) and Swiss franc (0.1%).

Ethna-DYNAMISCH

State: 03/09/2026

Key points at a glance

• Positive monthly performance of 3.03% (YTD: 7.15%)
• 83.1% gross equity allocation, no derivatives
• 15.8% bond allocation (short-dated AAA bonds); 2.0% cash allocation
• 4% currency risk (2.1% CHF, 2.8% JPY, -0.9% USD)

Equities: exceptionally strong earnings season with an optimistic outlook

The fund's thematic approach worked well over the past month, with the fund gaining 3.03%. The themes we identified remain fully invested. This month's work involved spreading each theme across a broader base of names — in the process, the number of companies held rose from 38 to 51. The three largest contributors to gains were ServiceNow, MP Materials and Amazon, together responsible for 1.97 percentage points of performance. On the downside, energy stood out as the weakest theme for the month, with two of the three worst-performing names coming from that sector. In total, the bottom three names shaved 0.8 percentage points off monthly performance. Comparing the two groups highlights the asymmetry of a well-balanced equity portfolio: the top three contributors offset 2.5 times the losses of the bottom three.

The bond allocation was further reduced alongside the higher equity weighting, falling from 27.2% to 15.8%. The fund's cash position now stands at 2.0%.

Currencies: minimal exposure further reduced

Ethna-DYNAMISCH's gross exposure to USD-denominated equities rose to 74.5% (prior month: 63.7%). After hedging, net USD exposure stands at just -0.9%. Our view of structural dollar weakness remains unchanged, and we continue to hedge the dollar exposure accordingly. Minimal positions in Japanese yen (2.1%)(2.8%) and Swiss franc (2.1%) leave the risk profile largely unaffected.

Small flag: your headline says exposure was "reduced," but the gross USD figure actually rose (63.7% → 74.5%) while the net figure fell to -0.9% due to hedging. The dollar exposure is hedged accordingly and consistently. Minimal positions in Japanese yen (2.8%) and Swiss franc (2.1%) leave the risk profile largely unaffected.

Ethna-DEFENSIV

State: 03/09/2026

Key points at a glance

• Negative monthly performance of -0.80% (YTD: -1.19%)
•  Fixed income allocation slightly increased to 96.9% (prior month: 95.3%)
•  3.1% cash allocation and 94 positions
•  HY allocation nearly unchanged at 5.0% (prior month: 5.2%)
•  Modified duration: 8.9 (prior month: 8.9)

Quality positioning unchanged; cash allocation raised slightly

Pressure on the long end of the euro curve persisted through August, though it eased considerably. Valuation markdowns remained concentrated in long-dated supranational holdings: unrealized losses on the EU bonds maturing in 2040, 2039 and 2045 each widened by roughly one percentage point. Offsetting gains came from the high-yield sleeve, led by Nissan Motor 2033 and Eutelsat 2033.

The portfolio saw no material shift over the month. The fixed income allocation rose from 95.3% to 96.9%, with cash falling correspondingly to 3.1%. Given the closed overlay position and the central bank meetings ahead, we view this liquidity buffer as adequate — leaving room for opportunistic purchases.

The portfolio's quality profile is unchanged. Investment-grade exposure stands at 91.8%, with the average rating still in the A- to A range. AAA paper remains steady at 17.6%, and the BBB bucket at roughly 34.1%. The top holdings — the EU bonds maturing in 2040, 2039 and 2042, along with the EDF green bond 2045 and EnBW 2036 — were essentially unchanged in both weight and composition. Nearly 87% of the bond portfolio doesn't mature until 2035 or later.

Modified duration held steady at 8.9. Reinvestment yields, meanwhile, improved noticeably: portfolio yield-to-maturity rose from 4.3% to 4.6%, with running yield at 4.4%.

The content of this page is intended for professional investors only.