Portfolio Manager Update

The New Year Begins with Tailwinds

State: 06/01/2026

Equity Markets: Broad-Based Rather Than Mega-Cap Driven

Recent market dynamics have been shaped by fears of an AI bubble and doubts about the economic viability of the circular economy. Individual technology companies, such as Oracle, came under pressure. Nevertheless, global equity markets proved surprisingly resilient. Stable corporate earnings and growing confidence that trade tensions have peaked provided sufficient support. Particularly noteworthy: while mega caps lost momentum, industrial stocks and small caps led the rally—signaling a broadening of market participation rather than a concentration on a few superstar stocks.

Fixed Income Markets: Headwinds from Rising Yields

By contrast, fixed income markets faced significant headwinds. The yield on the German Bund rose from 2.69% to 2.85%, while U.S. Treasuries climbed from 4.01% to 4.13%. This move was not driven by weaker-than-expected U.S. inflation data, but rather by more hawkish central bank communication and upwardly revised growth forecasts for 2026. At the same time, monetary policy divergence remains pronounced: the ECB continues to take a wait-and-see approach, while the Bank of Japan has raised policy rates. In contrast, the Federal Reserve and the Bank of England have cut rates.

Economic Outlook 2026: Multiple Sources of Tailwind

The economic outlook for 2026 is favorable. Targeted fiscal stimulus in China, European fiscal packages, and upcoming U.S. tax cuts are expected to provide a meaningful boost to global growth. This combination of coordinated fiscal measures and still supportive monetary policy should enable growth to accelerate beyond consensus expectations. In addition, persistently strong demand for AI-related investments represents a structural megatrend that continues to support global trade and corporate earnings.

Our Current Assessment and Positioning

Overall, the fundamentals point to a constructive scenario. Despite justified discussions around potential bubbles, the combination of solid earnings growth, fiscal and monetary support, and technological tailwinds remains compelling. As active managers, we are strategically positioned in equities while closely monitoring market breadth and quality, as well as signals from central banks.

Ethna-DEFENSIV

State: 06/01/2026

Key points at a glance

• Ethna-DEFENSIV (T) declined by 0.67% in December and closed the year with a year-to-date performance of 2.91%.
• Duration unchanged: The modified duration was kept stable at 8.1, consistently maintaining the portfolio’s positioning for the expected decline in long-end yields.
• Strategic focus: Trading activity in December was characterized by a reallocation from government bonds into long-dated corporate bonds. The objective was to preserve sensitivity to a potential turning point in interest rates while selectively reducing credit risk exposure within the high-yield segment.
• Performance drivers: The moderately negative performance was primarily driven by the portfolio’s elevated duration. Despite rate cuts at the short end of the curve, long-end yields edged higher toward year-end, weighing on valuations of long-duration securities.

Market development

Market conditions in December were shaped by the continuation of the U.S. rate-cutting cycle. The Federal Reserve lowered the policy rate as expected by a further 25 basis points, to a target range of 3.50%–3.75%. This move was supported by a decline in PCE inflation to 2.7% and more moderate consumer activity. Nevertheless, the Fed’s communication remained cautious, with a possible “hawkish pause” in January, reflecting internal disagreement within the committee regarding future risks.

In the euro area, the European Central Bank maintained its wait-and-see stance and left interest rates unchanged, while inflation remained close to target at 2.1%.

Strategy and portfolio adjustments

In December, we adhered to our strategy of positioning the portfolio as strongly as possible for an easing in interest rates, keeping modified duration unchanged at an elevated level of 8.1. Market movements were used to implement selective adjustments.

• Sales: We reduced our holdings in Spanish government bonds and exited our position in OSRAM AG (10.5% coupon, maturity 2029). The sale of the OSRAM bond served to selectively reduce credit risk exposure within the high-yield segment.
• Purchases: In exchange, we added high-quality, long-dated corporate bonds, including positions in Vonovia SE (BBB+ rating, 4.5% coupon, maturity 2040) and OMV AG (3.875% coupon, maturity 2040).

These transactions underscore our strategy of optimizing credit risk by reallocating toward issuers with strong credit quality and high interest rate sensitivity (duration). Vonovia, in particular, stands out despite sector-wide pressure, given its stabilized leverage profile (LTV of approximately 50%) and robust cash flow generation, making it an attractive investment for the current market environment.

Ethna-AKTIV

State: 06/01/2026

Key points at a glance

• Ethna-AKTIV (T) gained 0.79% in December, bringing year-to-date performance to 8.12%.
• The fixed income allocation was reduced by 10 percentage points to 45.9%. The average credit rating stands between A and A+.
• Modified duration remained stable at 9.8. No overlay strategy is currently in place.
• The net equity exposure was reduced to 33.2% at month-end through an 8% short equity futures position.
• The portfolio’s currency exposure currently amounts to 24.2%, comprising 21.8% USD and 2.4% CHF.

Equities: Calm Environment – Constructive Outlook

Stock markets experienced an exceptionally calm phase during the reporting month. Both price fluctuations and expected volatility—measured by indices such as the VIX and VSTOXX—remained close to their annual lows, at levels below 15 points. As a result, there was no need to adjust the portfolio’s net equity exposure during the course of the month. However, at month-end, net exposure was reduced to 33.2% via futures.

We maintain our constructive outlook. Against the backdrop of improving market breadth, a fourth consecutive bull market year—albeit with somewhat higher volatility—appears plausible. Regardless of December’s market performance, we consider disciplined preparation for the coming year to be essential. Our focus remains on robust business models, relative valuation attractiveness, and a balanced risk profile.

Current equity allocation:

• 36 individual stocks
• Focus on US stocks; European equities  at ~5%
• Overweight in financials and utilities

Fixed Income: Quality and Active Risk Management

The fixed income portfolio continues to be characterized by stability and strong security selection. During the past month, rising yields created headwinds. In response, and as part of our risk management process, we sold all Spanish and French government bonds with a total weight of approximately 10 %, thereby reducing the portfolio’s overall interest rate risk.

Despite the temporary pressure from yields, we continue to expect a stable to moderately declining interest rate environment. Consequently, the modified duration remains unchanged at 9.8. There is currently no duration overlay in place.

Fixed Income Portfolio – Key Facts:

• 12.4% government bonds
• 33.5% corporate bonds
• Average rating: A to A+
• Current yield: 4.4%

Currencies: USD as a Stabilizing Factor

We continue to see no reason to adjust the U.S. dollar exposure, which stands at approximately 22%. Contrary to market consensus expecting a weaker U.S. dollar, we believe that a widening growth differential could support the greenback. Additionally, the prospect of potentially more aggressive policy steps by the Federal Reserve could further shrinken the interest rate differential in favor of the euro—an outcome that is already largely priced in.

Given the relatively high equity exposure within the Ethna-AKTIV, the USD allocation provides an important diversification and stabilizing effect within the portfolio.

Ethna-DYNAMISCH

State: 06/01/2026

Key points at a glance

• Ethna-DYNAMISCH (T) gained 1.72% in December, bringing year-to-date performance to 10.86%.
• The net equity exposure increased over the course of the month from 88.1% to 97.3%.
• 4% of the fund is currently invested in cash-like bonds, while the cash position stands at 0.8%.
• The portfolio’s currency exposure currently amounts to 29.7%, of which 23.8% is U.S. dollar exposure.

Equities: Calm Market Environment – Constructive Outlook

Stock markets remained exceptionally calm in December. Measured by volatility indices such as the VIX and VSTOXX, price movements were limited and, at levels below 15 points, close to their annual lows. Consequently, there was no need to adjust the portfolio’s net equity exposure. We continue to maintain a constructive outlook.

Against the backdrop of improving market breadth, a fourth consecutive bull market year—albeit with somewhat higher volatility—appears plausible. Regardless of market performance in December, we consider disciplined preparation for the coming year to be crucial. Our focus remains on robust business models, relative attractiveness, and a balanced risk profile.

Current equity allocation:

• 58 individual holdings
• Focus on US stocks; European equities at ~ 24%
• Underweight in FANG stocks
• Overweight in industrials, financials, and utilities

Bonds & Liquidity: Scope for Equities

The bond portfolio was further reduced to create additional room for equity purchases. Currently, only a short-dated KfW bond remains. Together with a cash position of 0.8%, these holdings represent the residual assets of an almost fully in equity invested mixed fund.

Currencies: U.S. Dollar as a Deliberate Diversification Factor

With the exception of the U.S. dollar, we continue not to hedge currency exposures. For each currency pair, exposures are generally limited to low single-digit percentage levels.

In our view, there is no reason to adjust the U.S. dollar allocation, which stands at approximately 24%. Contrary to market consensus expecting a weaker U.S. dollar, we believe that a widening growth differential could support the greenback. Another implication is that potentially more aggressive policy steps by the Federal Reserve could shrinken the interest rate differential in favor of the euro—an outcome that is already largely priced in.

Given the high equity allocation within Ethna-DYNAMISCH, the USD exposure provides an important diversification benefit to the portfolio.

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