The model portfolios have been constructed based on the VIG Investment Clock and our tactical asset allocation strategy, using following principles: we have selected 4–5 investment funds from our own range.
In all three currencies, the Conservative Portfolio targets a composition of 40% equities and 60% bonds, while the Dynamic Portfolio focuses on 60% equities and 40% bonds.
The key economic factors behind these allocations include global and regional economic trends, expectations of central bank interest rate cuts, and investor sentiment.
Conservative portfolio focuses more on stability and fixed income assets (bonds), whereas dynamic portfolios aim for higher-yield outlook, using the volatility of equities. ESG considerations remain important, particularly in emerging markets and mixed-asset funds.
Investment Approach
Our investment approach this month is slightly more confident than before. As the global economy shows tangible signs of life – perhaps we’ve already passed the latest downturn’s lowest point – we have upgraded equities and modestly reduced bond exposure. Within the bond segment, Hungarian government securities currently offer the most attractive outlook: the forint remains stable, interest rates are high, and the yield premium is significant not only compared to the U.S. and eurozone, but also relative to neighboring countries.
Our forecasting model, the VIG Investment Clock, has now slipped back into a global recession phase. This confirms last month’s expectation: the previous upward trend could only have been validated by three consecutive months of similarly positive indicators.
In a recessionary environment, careful selection is key. According to classic investment rules of thumb, bond markets tend to perform above average during such periods. Based on our model, however, we see the strongest yield potential within the Central European region – especially in Hungarian bonds. Forint interest rates remain high: the 10-year risk-free yield stands at 6.9% per annum, a substantial premium compared to similar-maturity government bonds in the U.S. (4.1%), Germany (2.7%), Poland (5.5%), Slovakia (3.5%), and Czechia (4.5%). The forint itself is strong – particularly against the U.S. dollar, with the HUF/USD exchange rate near 330, a more than two-year high – a key consideration for foreign investors seeking to maximize total returns.
Emerging markets also look promising from an equity perspective. The weaker dollar benefits both government budgets and corporate balance sheets in these countries, as a substantial portion of their sovereign and corporate debt is denominated in dollars. Growth momentum is notably stronger than in developed markets: GDP expansion is, on average, 2 percentage points higher, and corporate earnings growth is in the double digits. Valuations are appealing as well: the price-to-earnings (P/E) ratio averages around 14 in emerging markets, compared to 23 on Wall Street. It’s no surprise, then, that much of the capital leaving the U.S. – amid growing uncertainty and a weakening dollar – is flowing into emerging market money and capital markets.
VIG EUR Portfolios
In the euro-denominated model portfolio, funds were reallocated from the VIG Active Beta Flexible Allocation Fund to the VIG Gold Sub-fund of Funds.
Within the euro portfolios, the Developed Market Short-Term Bond Fund continues to hold the largest weight. The recently launched U.S. rate cuts – given rather uncertain long-term inflation and fiscal outlooks – are likely to benefit shorter-term bonds the most through declining yields and corresponding price appreciation.
VIG USD Portfolios
In the dollar-denominated model portfolios, the VIG Gold Sub-fund of Funds has been newly added as a tactical element, funded by reallocating assets from the VIG Active Beta Flexible Allocation Investment Fund.
This flexible, multi-asset fund remains aligned with our overall portfolio strategy, maintaining meaningful exposure to Central European (Hungarian and Romanian) bonds as well as positions in gold, balancing diversification with attractive yield potential.
Disclaimer
This is a distribution announcement. In order to make well-founded investment decisions, please inform yourself thoroughly regarding the Fund’s investment policy, potential investment risks and distribution in the Fund’s key investment information, official prospectus and management regulations available at the Fund’s distribution outlets and on the Fund Manager’s website (www.vigam.hu). Past returns do not predict future performance. The future performance that can be achieved by investing may be subject to tax, and the tax and duty information relating to specific financial instruments and transactions can only be accurately assessed on the basis of the individual circumstances of each investor and may change in the future. It is the responsibility of the investor to inform himself about the tax liability and to make the decision within the limits of the law. The information contained in this leaflet is for informational purposes only and does not constitute an investment recommendation, an offer or investment advice. VIG Asset Management Hungary Closed Company Limited by Shares accepts no liability for any investment decision made on the basis of this information and its consequences.