Portfolio Manager Update

Market view

State: 06/10/2025

After one earnings season comes the next!
As in football, the same holds true for markets: after the match is before the match. Strong Q2 results pushed indexes to new record highs, but investors are already looking ahead to the next round of earnings. In the meantime, macro data provide orientation.

The expected slowdown in U.S. growth has barely materialized so far: consumption and leading indicators remain robust, with only the labor market showing weakness.
The Federal Reserve has responded by shifting the emphasis within its dual mandate toward employment—and despite elevated inflation, it launched a new rate-cutting cycle in September. We anticipate at least six more cuts.

On both sides of the Atlantic, large fiscal packages and broadly supportive monetary policy continue to underpin markets. Investors have rewarded these prospects with record-low bond spreads and equity indexes near all-time highs, albeit at stretched valuations. The decisive question: how much of this is already priced in?

We continue to believe that markets are not a one-way street, and even bull markets depend on interim consolidations. The bigger picture matters.
Given the U.S. government shutdown, the unresolved U.S.–China tariff dispute, and a curious mix of complacency on one side and deep skepticism on the other, we do expect some volatility.
But we also expect that volatility to resolve in further gains. Strategically, we foresee higher equity prices and lower interest rates, but are positioning our funds more defensively in tactical terms.

Ethna-DEFENSIV

State: 06/10/2025

Key points at a glance

• Credit markets delivered very strong performance in September.
• Against an uncertain backdrop, the fund continued its positive momentum, supported by favorable positioning in rates, posting a +0.43% gain in September (YTD: +3.10%).
• Strategic duration positioning: Modified duration was increased from 6.37 to 6.83 to benefit from expected rate cuts.
• Focus on quality and maturity extension: Portfolio rotation into long-duration sovereigns and top-rated corporate (investment-grade) bonds.

Bond strategy

Credit markets remained exceptionally tight in September: U.S. investment-grade spreads stood at a narrow 77 basis points. European credit was favored over U.S. credit, reflecting reduced tail risks and more attractive valuations—particularly in investment grade. Overall, the risk-reward profile remains historically tight and asymmetric.

September was used for strategic consolidation and preparation for Q4. The month’s +0.43% performance was driven by active duration management and credit positioning, lifting YTD returns to +3.10%.

We took advantage of market moves to deepen positioning for lower rates, lifting Modified duration to 6.83. This shift reflects a clear strategic orientation:

1. Duration & Quality – Increased exposure to long-dated sovereign bonds (e.g., France, Italy) and supranationals (e.g., European Union maturities out to 2045). Purchases were financed through the sale of shorter-dated or lower-yielding investment-grade bonds in the financials and industrials segments.
2. Credit Risk – The high-yield allocation was maintained at around 11%, focused on selective, fundamentally strong names, including an addition to INEOS Finance. We continue to see relative catch-up potential in European high yield compared with U.S. markets.

Ethna-AKTIV

State: 06/10/2025

Key points at a glance

• Performance: The fund gained +2.3% in September, bringing the year-to-date return to +5.79%.
• Fixed Income Allocation: Bond exposure was reduced by 5.4 percentage points to 3%. The average rating remains A– to A.
• Duration: The modified duration stands at 5. Currently no overlay in place.
• Equity Allocation: The net equity quota was raised by 4.8 percentage points to 2% during the month.
• Currency Risk: FX exposure totals 4% (15.2% USD, 0.2% CHF).

Equity strategy

Portfolio management was driven less by a modest increase in the net equity allocation (+4.8 percentage points to 37.2%) and more by focused single-stock selection.
The underweight in FANG names was maintained, while financials were reduced. By contrast, exposure to consumer, pharma, and industrials was increased. The number of individual holdings rose to 38.

Looking ahead, we remain constructive on equities through year-end and into 2026. Near-term, however, headwinds persist: fading momentum, narrow market breadth, the U.S. government shutdown and stalled trade talks between China and the U.S.
Against this backdrop, we are going to trimm the net allocation slightly at the start of the month via derivatives.

Bond strategy

Adjustments in the bond portfolio were concentrated in sovereign exposure. U.S. Treasuries were sold around the Fed’s rate decision, while French government bonds were raised to just over 5% of the portfolio.
We view France’s current crisis as temporary and see the ~80 basis point spread over Bunds as an attractive entry point.

The portfolio now consists of 14.1% sovereign and 43.2% corporate bonds. Modified duration has risen to 8.5 through these transactions, with no overlay in place. With its current quality and duration, the portfolio currently yields 4.2%.

Currency strategy

Our stance on the U.S. dollar has been adjusted slightly. While the long-term drivers of dollar weakness remain intact, many of these factors appear largely priced in.
Meanwhile, near-term dynamics—such as the Treasury’s replenishment of its General Account and a relative normalization of the U.S. current account deficit—argue for at least a temporary reversal.

Accordingly, we raised USD exposure from 2.7% to 15.2%.

Ethna-DYNAMISCH

State: 06/10/2025

Key points at a glance

• The Ethna-DYNAMISCH (T) gained 3.91% in September, bringing year-to-date performance to 6.69%.
• The net equity allocation increased slightly by 1% over the month to 79.9%.
• 11.7% of the fund is currently invested in cash-equivalent bonds, while the cash position stands at 8.6%.
• The portfolio’s currency exposure is 26%, of which 20.7% is in USD.

Equity strategy

The portfolio composition delivered strong results in September. Despite the broader market rally being driven by only a handful of names, the DYNAMISCH portfolio holdings participated effectively.
The net equity allocation remained unchanged, rising to 79.9% purely as a result of performance. We positioned the portfolio slightly more defensively, expanding the number of holdings from 43 to 56.
Technology exposure was reduced in favor of commodity and utility stocks.

Bond strategy

No changes were made to the bond allocation. Currently, 11.7% is invested in high-quality short-duration securities. Along with the 8.6% cash allocation, these positions serve as both stabilizers and a liquidity pool for opportunistic equity purchases.

Currency strategy

Currency risks remain largely unhedged, with the exception of the U.S. dollar. Position sizes per currency pair generally remain in the low single digits.

We have slightly adjusted our stance on the USD. While long-term drivers of dollar weakness remain intact, many of these factors now appear largely priced in. Near-term dynamics—such as the U.S. Treasury’s replenishment of its General Account and a relative normalization of the current account deficit—support a temporary reversal.