Portfolio Manager Update

Market view

State: 31/07/2025

In July, expectations for the performance of the S&P 500 were not disappointed. As in the ten July months before, the U.S. benchmark index was able to gain again last month. In its wake, other global equity indices also rose, and credit spreads for both investment-grade and high-yield bonds narrowed. So, there is no sign of a summer slump.

Driven by AI companies, U.S. equities were able to further reduce their year-to-date performance gap compared to European indices. It is particularly positive that, despite the technology-driven rally, market breadth also continued to improve. The reasons for this positive development are manifold. One factor was the final passage of the “One Big Beautiful Bill,” which brought significant fiscal support in the U.S. Another was progress in the ongoing global tariff dispute, which began with another ultimatum (August 1) but ultimately led to important agreements with Japan and the European Union. Although an agreement with China is still pending, these developments have removed a great deal of uncertainty from the market.

The bond market reacted relatively calmly: while ten-year U.S. yields briefly tested the 4.5% mark before settling below it, European yields rose slightly over the course of the month. The labour market remained robust, and also inflation developments gave no reason for concern. As expected, the Fed and the ECB left their key interest rates unchanged. Nevertheless, Fed Chair Powell remains in focus: the probability of a rate cut in September currently stands at around 40%.

For the S&P 500, the outlook for August is rather mixed from a historical perspective. Over the past ten years, months with gains and losses have been roughly balanced.

Ethna-DEFENSIV

State: 31/07/2025

Key points at a glance

• The Ethna-DEFENSIV (T) gained 0.41% in July (YTD: 2.29%).
• Positive performance in July: The fund benefited from a favourable market environment, particularly due to tighter credit spreads.
• Active portfolio adjustments: Targeted purchases in the investment-grade segment, especially in the medium to longer maturity range, as well as selective additions in the high-yield segment.
• Stable duration: The portfolio’s modified duration remained largely stable at 6.4.
• Focus on attractive yields: The portfolio continues to be geared towards attractive risk-return profiles, with demand for investment-grade bonds remaining strong.

Bond strategy

In July, the Ethna-DEFENSIV was able to benefit from the current market conditions. We further optimised the bond portfolio through targeted purchases. In particular, new corporate bonds with maturities between 2028 and 2035 were added in the investment-grade segment. This allows us to secure attractive risk-return profiles while keeping the maturity structure stable. At the same time, we sold some existing positions (also with shorter remaining maturities) to maintain flexibility in the portfolio and seize new opportunities. There were also selective additions in the high-yield segment, which continues to make up a small portion of the portfolio, in order to capture additional yield opportunities.

These adjustments resulted in a largely stable modified duration of 6.4 for the bond portfolio at the end of the month. This stability reflects our conviction that longer maturities continue to offer attractive yields. Inflation expectations appear stable, and the pressure on government bond yields is likely to ease.

Demand for U.S. and European investment-grade bonds remained high in July. As a result, credit spreads narrowed further, which significantly contributed to the fund’s positive performance. The business models of the issuers in the portfolio remain robust, making a significant widening of credit spreads unlikely.

Ethna-AKTIV

State: 31/07/2025

Key points at a glance

• The Ethna-AKTIV (T) gained 1.5% in July.
• The bond quota remains unchanged at 60.5%. The average rating is between A- and A.
• The modified duration is 7.5. Currently no overlay.
• The net equity allocation of 30.5% slightly increased over the course of the month but was reduced to 25.8% by month-end through sales.
• The portfolio’s current currency risk is 5.4% (3.1% USD and 2.3% CHF)

Equity strategy

With the growing number of agreements in the tariff dispute, we believe the greatest source of uncertainty is steadily being reduced. Nevertheless, we are starting the coming month with a reduced net equity allocation of 25.8%. Strategically, we remain positive on the equity asset class. However, the combination of seasonality, a certain complacency among investors, and the “buy the rumor, sell the fact” reaction we expect gives us reason to act more cautiously in the coming weeks. While earnings season has been delivering mostly positive surprises, in most cases companies are merely exceeding the lowered forecasts from the first quarter. There is no reason for euphoria, but no reason for panic either.

The portfolio currently consists of fewer than 30 individual stocks and, following recent profit-taking, no longer holds any FANG names.

Bond strategy

The bond portfolio continues to impress with its high quality. It remains unchanged, consisting of 13.7% government bonds and 46.8% corporate bonds; no significant adjustments were necessary. The modified duration now stands at 7.5, and thus above the long-term average – a reflection of our expectation that interest rates will not rise sharply. There is currently no additional overlay. With the current quality and maturity profile, the portfolio is achieving a current yield of 4.3%. This is the result of historically low credit spreads and our uncompromising commitment to quality.

Currency strategy

We continue to hedge the U.S. dollar down to a residual position of 3.1%. Although there are many long-term arguments against the U.S. dollar, the short-term outlook after the strong market moves is less clear. Given the high degree of uncertainty, we are sticking to our strategic underweight. The only remaining foreign currency position besides the U.S. dollar is 2.3% Swiss francs.

Ethna-DYNAMISCH

State: 31/07/2025

Key points at a glance

• The Ethna-DYNAMISCH (T) rose by 3.92% in July.
• The net equity quota was reduced from 78.2% to 71.6% by the end of the month.
• 5% of the fund is currently invested in cash-equivalent bonds. The cash position currently stands at 18.8%.

Equity strategy

The targeted dynamization of the fund through the inclusion of some higher-growth stocks has already borne fruit in recent weeks. The Ethna-DYNAMISCH was able to participate appropriately in the rally of technology stocks.

The added value of this portfolio is intended to stem primarily from targeted stock selection and only secondarily from asset allocation. Nevertheless, we decided to reduce the net equity allocation to 70% at the end of the month. Strategically, we remain positive on the equity asset class. However, the combination of seasonality, a certain complacency among investors, and the “buy the rumor, sell the fact” reaction we expect gives us reason to act more cautiously in the coming weeks. The portfolio currently consists of 43 individual stocks.

Bond strategy

There have been no significant changes to the bond portfolio. 10.5% is invested in short-dated, high-quality titles, which – together with a cash position of 18.8% – serve as a stabiliser and liquidity pool for opportunistic purchases on the equity side.

Currency strategy

We continue to maintain our strategy of not hedging currency risks – with the exception of the U.S. dollar. For each currency pair, these are generally low single-digit percentage amounts.

Although there are many long-term arguments against the U.S. dollar, the short-term outlook after the strong market moves is less clear. Given the high degree of uncertainty, we are sticking to our strategic underweight and have hedged the U.S. dollar down to 18%.