Portfolio Manager Update

Macro Navigator

State: 05/03/2026

Market developments in February were dominated by three key themes: the next step in the AI revolution, a new round in the global tariff dispute, and the dramatic escalation of the conflict with Iran. At the same time, a robust earnings season ensured that risk markets remained surprisingly resilient despite these shocks.

The situation in the Middle East reached a new peak at the end of February when the U.S. and Israel launched coordinated airstrikes against targets in Iran. This operation marks a clear escalation of a conflict that has been simmering for years and increases risks for energy prices, supply chains, and global risk perception. At the same time, the war in Ukraine marked its fourth anniversary - a conflict that has increasingly turned into a war of attrition and is structurally burdening Europe with higher defense spending and persistent uncertainty.

Accordingly, markets are placing high hopes on the meeting announced for late March between President Trump and President Xi, which could at least temporarily ease tensions and reduce the risk of further trade policy and geopolitical missteps.

With the introduction of so-called agentic AI systems, the focus is shifting from pure text generation toward autonomous digital “assistants” capable of planning, executing, and optimizing entire workflows. In the short term, this development fuels concerns about the downsizing of entire industries, but in the medium to long term it represents an important driver of productivity and potential growth.

The U.S. Supreme Court (SCOTUS) set an important precedent on the trade policy stage: in a landmark ruling, it declared tariffs imposed under the emergency law IEEPA inadmissible. As a result, the U.S. President loses a key instrument for unilaterally imposing new special tariffs. This also weakens a significant threat mechanism vis-à-vis trading partners. However, existing tariffs imposed under other legal bases such as Section 301 or Section 232 remain in force, meaning the broader trend toward fragmentation of trade relations persists.

Market Navigator

Bonds / Yields

At the end of February, the yield on 10-year U.S. Treasuries stood at around 3.94%, significantly below the level of a month earlier (4.24%). Historically, the curve remained relatively flat, with several Fed rate cuts for 2026 still priced in at the short end. Solid U.S. economic data and a still-robust labor market, however, limit the scope for significantly faster or more aggressive easing steps.

Risk premiums in the U.S. credit market remained at low levels overall: the high-yield spread in February, at just under 3 percentage points, hovered only slightly above historic lows. This indicates continued high risk appetite. Investment-grade spreads also remained tight, reflecting a combination of solid corporate balance sheets and ongoing demand for yield in an environment of stable interest rates.

In the eurozone, the yield on 10-year German Bunds declined slightly over the month, standing at around 2.64% at the end of February, down from just under 2.84% at the end of January. Declining inflation rates and hopes for cautious monetary easing by the ECB supported demand for safe euro government bonds.

On the credit side, spread compression continued in Europe: EUR investment-grade spreads remained tight, while EUR high-yield spreads narrowed moderately. This was supported by the search for yield and the still-robust corporate earnings situation.

In the portfolio, we remain committed to our defensive, quality-oriented positioning. Against the backdrop of stable to slightly declining core yields and tight spreads, we continue to focus in the bond segment on high-quality issuers and comparatively longer duration by historical standards. This allows us to benefit from potentially lower yields without taking on excessive credit risk. The focus remains on European issuers.

Equities

Earnings season on both sides of the Atlantic was overall better than feared. Many companies reported solid revenue and profit growth and in some cases raised their guidance. This helped offset uncertainty triggered by geopolitical and tariff issues and prevented larger price declines, particularly in AI-related sectors benefiting from the investment programs described.

At the same time, volatility remains elevated. Any new headline from Tehran, Washington, or Beijing can trigger short-term movements, especially as valuations in many market segments are already ambitious. The structural picture - higher productivity through AI, ongoing fiscal stimulus, and selective growth - remains intact, but is increasingly overshadowed by geopolitical tail risks.

We continue to see strong arguments for maintaining exposure to quality stocks and companies with clear AI and automation linkages. At the same time, equity portfolios should be made more resilient to political shocks - including through broader regional diversification, more defensive sectors such as pharmaceuticals, and selective exposure to energy and raw materials.

Currencies

The U.S. dollar remained volatile in February but stayed within a relatively narrow trading range overall. EUR/USD traded mostly between around 1.17 and just over 1.19, ending the month at approximately 1.18. Political headlines, discussions about Fed independence, and shifting risk sentiment repeatedly caused fluctuations, but without establishing a clear, sustainable trend.

The “dollar dominance” of recent years appears temporarily muted. On the one hand, a reduced interest rate differential relative to the euro area and ongoing geopolitical noise surrounding U.S. tariffs and unilateral foreign policy actions are diminishing the greenback’s attractiveness as a safe haven. On the other hand, solid U.S. economic data and the nomination of Kevin Warsh are supporting confidence. As Warsh is considered an advocate of independent and relatively strict monetary policy, observers do not expect an overly loose Fed stance. Notably, a weaker U.S. dollar has meanwhile become the consensus expectation among many market participants — an environment in which negative surprises for the dollar appear limited.

Against this backdrop, our outlook for the U.S. dollar remains open. The short-term direction will depend largely on whether upcoming macroeconomic data confirm or challenge current optimism for the euro area and expectations of further Fed easing. As long as no clear fundamental impulse emerges, we are keeping our dollar allocation unchanged. The yen and Swiss franc now contribute to further diversification of our currency positioning.

Ethna-AKTIV

State: 05/03/2026

Key points at a glance

• Positive monthly performance of +0.75% (YTD: +2.94%)
• Bond allocation: 49.2%
• Modified duration: 9.8; average rating: A- to A
• Gross equity exposure: 43.4%; net equity exposure: 40.4%
• Currency exposure: 29.3% (18.4% USD, 4.3% CHF, 5.9% JPY, 0.7% KRW)

Over the course of the month, we made only moderate adjustments to the Ethna-AKTIV bond portfolio. It remains clearly focused on high quality and a comparatively long average maturity. The 13.3% allocation to government bonds consists entirely of EU issuances with maturities between 2039 and 2045. The majority of corporate bonds are denominated in euro, with only around 10.5% allocated to U.S. dollar bonds.

With this structure, we achieve what we consider an attractive yield to maturity of 4.3%. Given current spreads, we see no reason to take on additional rating risk in pursuit of marginally higher returns. The bond portfolio contributed 0.79% to monthly performance. At the same time, we reduced the previously elevated liquidity ratio at the beginning of the month to 5.1%.

We also made targeted adjustments to the equity portfolio during the reporting month. The share of U.S. equities was reduced from around 80% to just under 71%. Additional regional diversification is provided primarily through positions in Japan and Switzerland. We are maintaining our underweight in technology stocks, as the ongoing sector rotation confirms our more cautious stance in this area.

With a net equity exposure of just over 40%, the increased volatility stemming from the escalation in the Middle East is noticeable in the portfolio, but is significantly cushioned by the more defensive stock selection. The equity portfolio contributed 11 basis points to monthly performance.

Overall, Ethna-AKTIV is gross invested 42.2% in U.S. dollar-denominated equities and bonds. After currency hedging, net U.S. dollar exposure stands at 18.4%. As we currently see no clear trend for the U.S. dollar, we are maintaining a hedge ratio of approximately two-thirds of the U.S. equity exposure. The build-up of Japanese equity positions has resulted in a new yen exposure of 5.9%. Given what we see as significant appreciation potential, we view this position as a potential additional performance driver over the coming years.

Ethna-DEFENSIV

State: 05/03/2026

Key points at a glance

• Positive monthly performance of +1.24% (YTD: +2.05%) in a February marked by interest rate volatility
• Bond allocation largely unchanged at 96.8%; cash ratio remains low
• Duration slightly increased to 8.36
• High-yield allocation broadly stable at 9%; selective rotation from short-dated HY into new, longer-dated issues

We used the increased volatility in bond markets to further refine the portfolio in a targeted manner without fundamentally changing the overall positioning. The bond allocation remained virtually unchanged at 96.8%.

In the primary market, we subscribed to several new investment-grade issues in our preferred 10–15-year segment, including Goldman Sachs (BBB+, 2039), T-Mobile USA (BBB, 2038), and WP Carey (2035). In the sovereign and supranational segment, we significantly increased our allocation through EU bonds (EUR 5 million, AA+), a position in the EIB (EUR 4 million, AAA), a EUR-denominated Indonesian bond (EUR 2 million, BBB), as well as zero-coupon bonds issued by the International Bank for Reconstruction and Development (IBRD) maturing in 2061 to increase duration. These purchases raised duration from 8.3 to 8.36.

In the corporate segment, we rotated out of the expensive short-dated Eutelsat position (9.75%, 2029) into new, longer-dated issues (2031/2033) and extended the maturity of our Gasunie exposure by three years within the same issuer. On the sales side, we exited several investment-grade positions, including Glencore, Royal Schiphol, and Athene Global.

In the high-yield segment, we reduced BB-/B exposure by selling Getty Images and selectively added to ZF Europe. The rating distribution shifted slightly in favor of higher quality, with the average rating remaining in the solid A range.

Currency risk remained largely unchanged, with net USD exposure at around 4%. The addition of the new USD bond Binghatti was offset by the sale of Getty Images. The portfolio remains strongly euro-focused at over 96%. Given the increased volatility of the U.S. dollar amid the Iran escalation, we see no reason to expand FX exposure.

The cash ratio remained at a low level, consistent with the high bond allocation of 96.8%. On balance, net purchases slightly increased the bond allocation. The remaining liquidity provides flexibility for opportunistic additions should geopolitical uncertainty - particularly the Iran conflict and Section 122 tariffs - result in attractive new issue premiums.

Ethna-DYNAMISCH

State: 05/03/2026

Key points at a glance

• Positive monthly performance of +1.69% (YTD: +7.03%)
• Gross equity exposure: 84.5%; no derivatives
• Bond allocation: 13.2%; cash: 1.4%
• Currency exposure: 38.2% (20.7% USD, 9.9% JPY)

Ethna-DYNAMISCH follows a thematic investment approach. The underlying themes did not change fundamentally during the month. Given supportive fundamentals, we added several Far Eastern stocks under the Japan theme that are expected to benefit from the announced fiscal package.

The reduction in large-cap technology stocks proved beneficial. These stocks were clear underperformers in February amid the sector rotation that took place. Although we continue to view these companies as long-term winners, we are hesitant to re-enter positions at this stage. We are maintaining the allocation reduction implemented in January, particularly given the unpredictable duration of the war in Iran.

Both in preparation for and in response to the escalation in the Middle East, we replaced several highly exposed tourism-related stocks or high-beta positions with more defensive names, for example in the pharmaceutical sector.

Assets not invested in equities are allocated to short-dated government bonds (13.2%) and cash (1.4%).

Ethna-DYNAMISCH is gross invested 48.1% in U.S. dollar-denominated equities. After hedging, net U.S. dollar exposure stands at 20.7%. Two additional notable FX positions that are deliberately unhedged are 9.9% in yen and 4.5% in Swiss francs.

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