Raiffeisen-Nachhaltigkeit-Rent: sustainable bond fund well positioned
This year, as for much of last year, the bond markets repeatedly priced in and out interest rate cuts, which led to strong price fluctuations. On balance, yields on US government bonds at the end of November were roughly where they had been in spring. They had fallen sharply in the meantime but have risen sharply again in the last two months. In this environment, the anti-cyclical investment strategy of the
When prices fell as a result of rising yields (or when yield premiums on corporate bonds widened), bond positions were (re)purchased. When prices rose, the fund management reduced the corresponding positions and took profits. In 2022, the fund management had already increased interest rate risk (duration) into the rise in yields (= falling bond prices) and continued to do so in 2023.
This strategy also paid off this year when bond prices rose sharply in the summer. During this strong upward trend, positions were reduced again somewhat and then built up again in recent weeks. The fund management took a similar approach when French bonds came under pressure in early summer due to severe domestic political turmoil. It bought French bonds, which it considered to be attractively valued at the time (relative to other core Eurozone countries).
Anti-cyclical action means that the fund management tends to reduce positions when valuations are high or rising and increase them when valuations are low or falling. However, this is not done "automatically" or reflexively, but always with a careful look at the general state of the market and fundamental economic trends.
With a current portfolio duration of around 7.6 years, the fund is very well positioned to benefit from any further falls in yields. The financial markets were still pricing in numerous interest rate cuts for this year in the summer, but these expectations were later largely priced out again. Nevertheless, the scenario of interest rate cuts in the USA and Europe is fundamentally intact. This should tend to lead to falling yields and rising bond prices. At the same time, the fund management still has good room for manoeuvre to buy more bonds and increase the interest rate risk. This could also allow any stress situations in the market to be used opportunistically, for example, to acquire bonds in sell-off situations at very attractive risk/return ratios.
Current positioning of the Raiffeisen-Nachhaltigkeit-Rent
As of the end of November 2024, the bond fund Raiffeisen-Nachhaltigkeit-Rent
is currently invested in bonds issued by states or state-related entities for nearly two-thirds of its portfolio,
and in corporate bonds for approximately one-third.
The average portfolio return is currently around 3.9% p.a. However, this average return on the fund portfolio is of course not the same as the expected future annual return. This may be lower or higher.
In general, the Raiffeisen-Nachhaltigkeit-Rent proved to be very resilient in the very difficult market environment of recent years. Of course, it was not able to completely escape the price declines on the bond markets, but usually held up considerably better than euro government bonds or euro corporate bonds, for example, during these phases. In peer group comparisons, the fund is one of the top funds over several investment periods. It has been able to capitalise on its strengths and strategic advantages, which make it a very interesting alternative for investors, especially now.
Strengths and strategic advantages
The strategy of the
long-term oriented (over 5 years),
operates in an anti-cyclical, flexible and valuation-orientated manner.
The fund aims to acquire bonds with a relatively high expected long-term return and an above-average Raiffeisen Sustainability Rating. The aim is to achieve a long-term volatility of 4% to 6%.
The fund management can invest in almost all bond sub-asset classes worldwide and act very flexibly and opportunistically, as there is no predetermined investment structure and no benchmark. In the extremely low interest rate environment before 2021, the fund management accordingly kept the duration in the fund portfolio very low, namely at the lower end of the strategic range, which extends from around 2 to 10 years.
In practice, this means that the fund management tends to act against the general market trend. For example, it reduces bond holdings or decreases interest rate risk in the fund portfolio when bond prices are rising and buys again when prices are falling (taking on more interest rate risk), but only if certain conditions are met. The most important conditions are valuations and return expectations. Bonds are not purchased per se when they fall, but only when they reach attractive valuations and yield levels as a result. In the extremely low-interest-rate environment before 2021, with very unfavorable return expectations for bonds, the investment specialists at Raiffeisen KAG therefore kept the interest rate risk in the fund portfolio very low, at the lower end of the strategic range.
The concept naturally also has risks. If the fund management is wrong in its assessment, it may buy too early. In general, cheap or attractive assets can always become cheaper/more attractive. Waiting for favourable entry points in no way means protection against price losses, but it does at least reduce these risks or their probabilities somewhat. Of course, this also applies to the current situation. The fund management can also be too ambitious and wait in vain for more favourable entry opportunities. Although this does not result in a loss of value in the fund, it may tend to result in lower returns from favourable market movements.
The fund Raiffeisen-Nachhaltigkeit-Rent generally pursues a very strict sustainability concept. As a result, bonds issued by many countries (including the USA), for example, are generally not eligible as an investment. However, these can often be replaced by bonds from supranational issuers (such as international development banks). The Raiffeisen ESG Indicator* of the fund is currently around 71 and therefore at a high sustainability level.
The fund's sustainability concept was once again awarded the coveted FNG sustainability seal of the "Forum Nachhaltige Geldanlagen" in Berlin in 2024 and the highest rating of three stars.
*The Raiffeisen Kapitalanlage-Gesellschaft m.b.H. continually analyses companies and countries with the help of internal and external research providers. Together with an overall ESG assessment including an ESG risk assessment, the results of the sustainability research are converted into the so-called Raiffeisen ESG Indicator, which is based on a scale of 0 - 100. The assessment is made in consideration of the company’s respective branch of business.
All information about the fund
Raiffeisen-Nachhaltigkeit-Rent
Further information:
The investment strategy permits the fund to predominantly (relative to the associated risk) invest in derivatives. The Fund Regulations of the Raiffeisen-Nachhaltigkeit-Rent have been approved by the FMA. The Raiffeisen-Nachhaltigkeit-Rent may invest more than 35 % of the fund's volume in securities/money market instruments of the following issuers: France, Netherlands, Austria, Italy, United Kingdom, Sweden, Switzerland, Spain, Belgium, United States, Canada, Japan, Australia, Finland, Germany.