On track for long-term success
Strong performance for Raiffeisen-MegaTrends-ESG-Aktien
The rebound for the fund, as well as for the major US equity indices since the end of 2022, has mainly been driven by big tech sector names. However, the pharmaceutical company Novo Nordisk (which recently became the new leader in terms of market capitalisation in Europe) was also one of the big winners in the fund. Generally speaking, in recent quarters company-specific topics and the earnings trend were the factor behind the share price development of certain equities to a relatively large degree, while economic factors (such as inflation, interest rates, and the business cycle) were less important.
At the moment, conditions remain difficult for many companies from the areas of renewable energy, such as wind power and hydrogen. The sharp rise in bond yields and capital market rates has generated intense pressure on the profitability of numerous projects in this sector. Additionally, many companies in this field are still posting losses and the value of any future profits is declining in parallel with the rising interest rates. A number of equities in these sectors have thus suffered from painful downward corrections.
At the same time, this highlights one of the strengths of the fund concept behind Raiffeisen-MegaTrends-ESG-Aktien:
The fact that the fund management is focusing on three major megatrends (climate change, demographic change, and technological change), as well as on various subordinated trends within these three themes, means that temporary price declines in some areas can be offset by other segments which are enjoying particularly good performance. For example, companies from the theme areas cloud computing, artificial intelligence (AI), e-mobility, and the “ageing society” and “work-life balance” have exhibited very strong price trends this year.
Raiffeisen-MegaTrends-ESG-Aktien
Fund manager Günther Schmitt gives in the video below a brief overview of the fund, which companies it invests in and who might be interested in the fund.
Is artificial intelligence (AI) a real revolution?
For several months now, artificial intelligence has been the hot topic on the markets, catapulting share prices for some chip manufacturers and software companies to dizzying heights. AI may lead to dramatic changes in many parts of the economy and everyday life, similar to what happened with the Internet. This represents great earnings and price potential for companies that offer or enable applications in this field, or that integrate AI solutions into their operations (cf. productivity growth thanks to the use of artificial intelligence).
In our view, it is thus incorrect to talk about a new “bubble” forming in the field of AI, despite the fact that clear signs of euphoria can be seen. At the same time, it is highly likely that not all of the companies which are seen as the potential winners of an AI revolution will be able to live up to the expectations. Ultimately, however, the same can basically be said for every trend in technology.
How sustainable is artificial intelligence?
Naturally, when it comes to Raiffeisen-MegaTrends-ESG-Aktien, the entire topic of artificial intelligence is also examined from the perspective of sustainability and ESG-criteria. It appears very likely that artificial intelligence can be used in a positive sense to achieve many of the United Nations’ sustainable development goals. AI can support progress in social areas and environmental and climate protection, as well as in the field of corporate governance and government and community affairs. One need only think of the more efficient use of resources, the development of new medicines, or the fight against corruption and cybercrime.
Risks and dangers of AI
AI also has its downsides as well though. AI applications use large amounts of energy, in their development stages and at times during their operation as well. It is possible that AI solutions will result in the disappearance of many jobs, to a degree that is currently unforeseeable, and this will lead to corresponding social and societal challenges. And, of course, artificial intelligence can also be used to achieve undesirable, negative ends (e.g. misuse of data, manipulation of opinions and news, weapons development). On the whole, however, it is clear that the advantages and positive effects have the upper hand, which is why we currently take a positive view of artificial intelligence from an ESG perspective.
USA: Soft landing or recession?
Almost 50% of Raiffeisen-MegaTrends-ESG-Aktien is invested in US companies. In light of this and the general significance of the USA for global economic performance and the global financial markets, monetary policy in the USA has a substantial impact both on US economic performance and the performance of the fund. From the current vantage point, we are optimistic that the USA will be able to avoid a recession both this year and in 2024, and we thus also have a positive opinion on the performance of many companies. That said, interest rates and bond yields in the USA will remain at high levels for a relatively long period of time. This suggests that conditions for equities will continue to be relatively positive for the next 12 to 18 months. Of course, it is possible that the performance of the US economy will be weaker than currently anticipated, but even this kind of scenario would not pose an insurmountable problem for Raiffeisen-MegaTrends-ESG-Aktien.
Looking at megatrends such as artificial intelligence or demographic change, it is quite clearly visible that many of the topics within the megatrend themes are only dependent on economic cycles to a lesser degree. Of course, this should not be taken to mean that they are completely invulnerable to fluctuations in the economy or general capital market trends. However, the share price volatility caused by such factors is generally temporary in nature and cannot halt or delay the underlying, fundamental developments in these megatrends.
Full potential only unfolds over the long term
Investors need patience, because – by nature – megatrends progress slowly and only exhibit their full potential over a longer time frame. Consequently, in order to achieve the best possible returns it is important to have an adequately long investment horizon and patience for the long run, in order to outlast the weak phases on the markets that are bound to occur at times.
The Raiffeisen-MegaTrends-ESG-Aktien exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.