The ERSTE STOCK BIOTEC invests mainly in biotechnology companies from developed countries. The investment process of the fund is based on fundamental company research. The majority of the companies in this area are based in the USA. Therefore, shares from the Pacific region and Europe play a subordinate role for the fund.
Turbulent first half year on the markets
The sentiment on the equity and bond markets was clearly down in the first half of 2022. Numerous factors are driving the current affairs at the moment. For example, inflation has increased significantly since the end of last year, which led the central banks like the Federal Reserve in the USA and the European Central Bank (ECB) to take action. In reaction to the drastic increase in inflation, the central banks tightened their monetary policy and heralded the end of low interest rates. The Ukraine war and increasing geopolitical tensions are also burdening share and bond prices.
The situation created by these three factors has increasingly led to concerns about economic growth, which is also reflected in the economic data. The development of the market environment in the second half of 2022 should therefore depend crucially on the path of inflation. Due to strong base effects, experts suggest that inflation might peak in autumn. The development of the Ukraine war from here on out will also remain an uncertainty factor for the rest of the year. Given this context, the risk of a recession is particularly high in Europe at this point in time.
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In the exclusive interview below about the first half of 2022, fund manager Harald Kober talks about his assessment of the YTD performance of the fund and his outlook for the coming months.
Interview with fund manager Harald Kober
What sort of performance did the fund achieve in the first half of 2022?
The fund clearly outperformed the broad market, supported by the appreciation of the US dollar relative to the euro. Despite rising inflation and interest rates, biotechnology managed to excel on the basis of its relatively weak correlation with other sectors and the overall market. We also saw a number of takeovers again (e.g. Biohaven) with strong weightings in the fund, which contributed positively to the performance.
How is ERSTE RESPONSIBLE STOCK BIOTEC currently positioned? What is your focus in this fund?
At the moment, the fund is increasingly invested in large-caps companies, with smaller companies playing a less important role. We have increasingly relied on companies that already have drugs or therapies on the market, generates sales, and/or are well financed. If the sentiment, which is currently not overly keen on this sector, were to change, we would start investing more in small and mid-caps again.
What is the outlook for the fund in the coming months?
Depending on the economic and geopolitical development, the sector could garner increased approval from investors again, especially if growth shares were to pick up momentum.
„If growth shares pick up speed again, the biotechnology sector will benefit.”
Harald Kober, fund manager ERSTE STOCK BIOTEC
Important legal note:
Past performance is not a reliable indicator of an investment’s future performance.