Portfolio Manager Update

Macro Navigator

State: 02/04/2026

In March, stock markets were influenced more by global politics than by economic data. This was primarily due to the war in Iran and the subsequent blockade of the Strait of Hormuz. A significant supply shock in the energy market, coupled with significant uncertainty regarding potential further escalations, prompted a re-evaluation of risk premiums in the equity and bond markets. According to purchasing managers’ indices, the conflict struck the global economy just as it was beginning to emerge from a multi-year period of stagnation. The path towards accelerated global growth has now been postponed.

The outbreak of the Iran conflict suddenly brought the energy sector into sharp focus. The tightening oil supply caused the price of Brent crude to temporarily rise well above US$120 per barrel. This resulted in sharp rises in transport, insurance and financing costs for global trade, as well as renewed upward pressure on already elevated short-term inflationary momentum. In response, strategic oil reserves were released. The US effectively eased sanctions on Russian energy exports to mobilise alternative sources of supply and mitigate the immediate impact on consumers and businesses. Consequently, issues of demand and productivity dynamics took a back seat, making way for concerns about energy shortages, distribution conflicts, and the resilience of global supply chains. The conflict in Ukraine has consequently lost significance, making a timely resolution less likely.

The current situation appears to present central banks with a classic stagflation dilemma. Before the conflict in Iran, it seemed as though key interest rates were slowly returning to normal. Now, however, central bankers must tread carefully as they consider whether interest rates can really be cut or if the conflict will cause prices to rise too quickly. Yields across the entire yield curve rose immediately. In our view, this is more a case of panic than a logical conclusion. In the short term, higher oil prices will fuel inflation. In the long term, however, this could have the opposite effect due to a potential collapse in demand. Therefore, we consider interest rate hikes in response to this supply shock to be a mistake.

Over the coming weeks, we will focus on several key factors. Firstly, the Iran conflict is now the main factor: if the situation in the Strait of Hormuz eases, energy prices will fall. This will then determine how inflation and the economy develop, as well as how central banks respond. Upcoming economic data will reveal the true severity of the situation. In particular, trends in Purchasing Managers' Indexes (PMIs), as well as labour market and price data from the US and Europe, will show the extent to which the shock has affected the real economy. The meeting between Presidents Trump and Xi, scheduled for May, remains a significant potential catalyst that could contribute to a moderate easing of the global trade and technology conflict, or potentially open up a further geopolitical front. In this uncertain climate, it is crucial to maintain flexibility, preserve liquidity buffers, and capitalise selectively on opportunities where the market is overreacting to short-term shocks and long-term fundamentals.

Market Navigator

In the capital markets, the geopolitical escalation was reflected by a sharp increase in risk aversion and accelerated sector rotation. Neither precious metals nor government bonds provided diversification benefits. This was due to rising real interest rates putting pressure on both markets.

Bonds / Yields

Over the course of the month, the yield on 10-year US Treasury bonds increased from 3.94% to nearly 4.5%. By the end of the month, it had closed at 4.32%. Rising short-term inflation expectations mean that all of the Fed’s interest rate cuts for 2026 have already been factored out of the market. The war is making it extremely difficult for central banks to formulate reasonable interest rate policies. The situation has simply become more complicated. Nevertheless, we continue to assume that a new Fed Chair will implement the associated easing measures as part of the policy agenda. Risk appetite for bond investments has also been affected. In the investment-grade segment, spreads have risen slightly to just over 90 basis points. Meanwhile, risk premiums in the high-yield sector stand at around 317 basis points, representing a significant increase compared to mid-January lows of around 250. Nevertheless, historically speaking, both spreads remain low.

Over the course of the month, the yield on 10-year German government bonds moved in only one direction: upwards. It increased from 2.64% to 3.00%. Due to fears of short-term inflation, the market has temporarily priced in three interest rate cuts by the ECB. We consider this to be excessive, and should the ECB follow through on this, we would regard it as disastrous policy. On the credit side, spread compression also came to a halt in Europe. EUR investment-grade spreads rose slightly to just under 1%, while EUR high-yield spreads rose to 332 basis points.

Our defensive, quality-focused strategy means we see no fundamental need for adjustment. However, the long maturities of our bonds are resulting in paper losses due to the current movement in interest rates. Nevertheless, we are confident that yields at the long end of the yield curve will remain stable or decline on both sides of the Atlantic. Short-term inflation fears are scaremongering and have little to do with the development of long-term yields. The reaction here is exaggerated in the short term. We continue to focus on high-credit-rating issuers and favour European issues.

Equities

March was a perfect storm for equities, with renewed disruption from the AI sector and geopolitical escalation in the Middle East. At the index level, we witnessed sharp corrections of around 10%. Interestingly, this has so far been purely a case of multiple compression. Published earnings forecasts have not yet changed. The sector rotation observed last month continued. The future earnings trajectory and associated share price performance depend heavily on the timeline of the conflict and resulting supply bottlenecks. Given the upcoming mid-term elections in the US, we remain optimistic and expect a de-escalation in the near future. It is likely that all parties to the conflict will claim some sort of victory. Our core thesis of higher productivity through AI, sustained fiscal stimulus and selective growth remains intact.

The portfolios have remained essentially unchanged, continuing to comprise high-quality shares and companies with a clear focus on AI and automation. At the same time, robust measures have been implemented in terms of both selection and allocation to navigate this volatile phase more effectively. Net positions have been tactically reduced further, while diversification has been achieved through selective investments in pharmaceutical, defence, energy and commodity stocks. Our strategic outlook remains positive. We are currently waiting for the right moment to unwind our tactical hedging positions.

Currencies

The conflict in the Middle East is also having an impact on currencies. The US dollar lived up to its reputation as a safe-haven currency. It climbed from a level of 1.18, rising by over three per cent at its peak. However, the future path will be shaped less by these flows and more by the likely narrowing of the interest rate differential with the eurozone, as well as the current heavy questioning of the growth outlook. If Kevin Warsh becomes the new Fed Chair in May as expected, we anticipate a policy agenda that will push for lower refinancing costs for both the US economy and, incidentally, the US government.

In light of the recent strength of the US dollar, we agree with the general consensus: we expect the US dollar to weaken in the longer term. For this reason, we have already reduced the quota and will make further adjustments. The yen and the Swiss franc are now contributing to the diversification of our currency position. In particular, we see enormous upside potential in the yen.

Ethna-AKTIV

State: 02/04/2026

Key points at a glance

• Monthly performance of approximately -3.52% (YTD -1.54%) in a month characterised by volatility in spreads and interest rates.
• Bond allocation remained almost unchanged at 96.3%, while the cash allocation remained low at 3.7%.
• Duration was 9.3 (core portfolio ~7.8; Buxl overlay contribution +1.5).
• HY allocation remained stable at 6.1%, with transaction volume significantly lower than in the previous month.

March was characterised by heightened volatility in both the credit and fixed-income markets. However, the fund’s underlying structure – quality-oriented, long-term and euro-dominated – remained unchanged. The Buxl overlay (115 contracts, equivalent to 4.76% of the nominal value) synthetically extended the duration to 9.3, which negatively impacted performance as yields at the long end of the EUR curve increased in March, resulting in a significant price decline for long-dated bonds.

The bond allocation remained almost unchanged at 96.3%, spread across 102 holdings. Trading volume was significantly lower than in February, a busy month, and no major reallocations took place. The portfolio remains clearly focused on long-term, euro-denominated, investment-grade bonds, as evidenced by its top holdings: EU bonds maturing in 2039 and 2040 (4.6% each); the EDF Green Bond 2045 (4.4%); and EnBW and JAB Holdings (3.8% each). The average rating remains solid in the A range, with AAA-rated securities accounting for 18.2% and the BBB segment (BBB+ to BBB-) accounting for around 33%.

The high-yield (HY) segment remained stable at 6.1%, with a predominant position in the BB category reflecting a defensive and conservative approach. There are currently no plans to increase the HY allocation.

Currency risk remains minimal, with a net dollar exposure of just 3.6%, and the portfolio remains more than 92% euro-focused. The dollar's slight weakness in March had only a marginal impact on USD-denominated positions when calculated in euros, with no material effect. There are no plans to increase foreign currency exposure.

Liquidity remains low at 3.7%, which is consistent with the mandate being almost fully invested. The Buxl overlay provides synthetic duration without tying up liquidity. This maintains the flexibility to make opportunistic purchases, should attractive entry points be presented by the persistently uncertain geopolitical environment or market volatility.

Ethna-DEFENSIV

State: 02/04/2026

Key points at a glance

• Monthly performance: -5.00% (YTD: -2.2%).
• Bond allocation: 50.5%.
• Modified duration: 9.7, extended to 11.3 via overlay; average rating of A to A+.
• Gross equity allocation: 42.2%; net: 29.5%.
• Currency risk: 21.9% (11.1% USD, 4.7% CHF, 5.5% JPY, and 0.6% KRW).

The Ethna-AKTIV fund's bond portfolio has not been adjusted. It is characterised by its high quality and long average maturity. The purchase of additional derivatives on 30-year German government bonds has increased the modified duration from 9.7 to 11.3. Last month's rise in yields led to losses, primarily due to the high duration leverage. This further confirms our view that yields have peaked. Short-term supply-side inflation should have little or no impact on longer-term yield levels over the next six to twelve months. In fact, the growth-inhibiting effect acts as a natural anti-inflationary measure and could ultimately lead to lower yields. The vast majority of corporate bonds are denominated in euros, with only around 9.2% denominated in US dollars. Alongside 13.5% in government bonds from European issuers, there is a cash allocation of 5.8%.

The equity portfolio has been adjusted in response to the volatile market environment. In terms of allocation, net equity exposure was reduced to around 30% using derivatives. Meanwhile, the gross equity exposure of 42.2% remained largely unchanged. Regarding stock selection, holdings with high beta were reduced and the continuation of the previously initiated sector rotation provided additional stability. Regional diversification via positions in Japan and Switzerland was maintained. Technology stocks remain underweight for the time being, although the correction has already created some initial opportunities here. We are monitoring these closely and will allocate to them when the time is right.

Overall, 40.3% of the Ethna-AKTIV fund is invested in US dollar-denominated equities and bonds. The unhedged US dollar exposure has decreased from 18.4% to 11.6%. We achieved this by taking advantage of the US dollar’s safe-haven strength. However, as we now anticipate a prolonged period of US dollar weakness, we are likely to reduce this allocation further. The yen exposure arising from share purchases in the previous month stands at 5.5%, having increased by a further 1.5% at the start of the month. Given the significant potential for appreciation that we see, we regard this position as a possible additional source of performance for the coming months.

Ethna-DYNAMISCH

State: 02/04/2026

Key points at a glance

• Monthly performance: -6.34% (YTD: +0.27%).
• Gross equity allocation: 59.9%, no derivatives.
• Bond allocation: 20.6%.
• Currency exposure: 30.8% (12% USD, 10.7% JPY and 5.2% CHF).

Due to our thematic approach and the current geopolitical situation, we have adjusted the themes in which we are invested. We believe that a resolution to the conflict in Ukraine has been pushed back indefinitely. Consequently, we have largely exited this theme in favour of defence, aerospace and energy. Large-cap tech stocks remain underweighted. We are already identifying opportunities here that could be reallocated in the near future. In the wake of increased volatility, the net allocation has been further reduced to just under 60%. This tactical measure is exceptional and will be reversed immediately should the situation de-escalate.

Funds not invested in equities are held in short-term government bonds (20.6%) and cash.

The Ethna-DYNAMISCH fund is 38.5% invested gross in US dollar-denominated equities. After hedging, the exposure to the US dollar stands at 12.7%. The US dollar allocation has been deliberately reduced in light of the dollar's recent strength, as we anticipate it will weaken in the longer term. Two other significant foreign exchange (FX) positions are 10.7% in JPY and 5.2% in CHF. These have not been hedged deliberately.

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