Why does an investment in fixed-term funds make sense?

Benefiting sustainably from attractive yields

In anticipation of the actual decisions, the bond markets are pricing in interest rate cuts relatively strongly, and these expectations will undergo a “reality check” in the course of the year, as will the very positive earnings estimates for 2024. Based on current conditions and forecasts as well as our indicators for assessing the market environment, we expect moderately positive economic growth, a notable recovery in corporate earnings, a continued decline in inflation rates, and thus falling interest rates in 2024. Despite the conservative investment concept of Raiffeisen-Mehrwert-ESG 2029, it should be possible to achieve attractive yields, even though the relationship between investment grade and high yield bonds is consciously weighted strongly in favour of better ratings.

Conservative investment concept

The portfolio structure of Raiffeisen-Mehrwert-ESG 2029 features 70% investment grade bonds and 30% high yield bonds, with broad diversification of the fund assets across numerous issuers and sectors, resulting in a low weighting of individual issuers. With this diversified portfolio, the fund can generate attractive, broadly predictable returns over the coming years, with an emphasis on a conservative approach.

Sustainability is incorporated

Raiffeisen-Mehrwert-ESG 2029 invests exclusively in bonds issued by companies that have been determined to be sustainable on the basis of ESG criteria. A strict sustainability concept is applied. For example, there is no investment in issuers which have business activities in the fields of oil, gas or nuclear power. While this narrows down the available investment universe somewhat, in the high yield segment in particular, the focus on ESG mainly results in higher-risk issuers being ruled out. Although this may mean giving up a couple of basis points of return on the one hand, it supports the fund’s conservative strategy on the other.

Lower risk premiums reflect hopes for interest rate cuts

Compared to past years, the risk-return constellation for corporate bonds currently looks good, and the fundamental situation of most companies also remains attractive, with broadly positive growth, hardly any defaults, and a good environment for refinancing. The lower risk premiums partly reflect the hopes of significant interest rate cuts in the near future.

Nevertheless, corporate bonds are not risk-free. In the event of a severe or protracted recession for example, or major financial market turmoil or economic shocks, prices can be expected to decline, possibly leading to loss of capital. At this juncture, however, such a scenario is not anticipated. Still, it is not possible to foresee what will occur in the next three to five years. This also applies to the interest rate risk in relation to the reinvestment of maturing bonds in the fund portfolio. The yields then possible may be higher or lower than currently foreseeable.

Please note that an additional, market-dependent fee is charged for purchases after the end of the subscription period. This flows directly into the fund assets and serves to protect existing investors.

As part of the investment strategy, starting six months before the end of the term, the Management Company is permitted to invest primarily in demand deposits or deposits with the right to be withdrawn.