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. Conservative portfolios tend to focus on stability and safer assets (bonds), while aggressive portfolios rely on higher-yielding but riskier equities. In its investment decisions, VIG Fund Management pays close attention to sustainability, particularly in ESG and sustainable funds.*
Investment Approach
Global economic growth has gained new momentum and, based on the global outlook, has entered an expansionary phase, which is fundamentally positive for the equity and commodity markets. At the same time, inflation data from key economic regions are coming in higher than previously expected. This inflationary pressure is expected to prompt central banks to raise interest rates in the future. The European Central Bank already began this process in June, when it raised its key policy rate by 25 basis points. The rising interest rate trend poses a risk to bond investments.
Among the key geographic regions, the United States continues to show stable growth, with business confidence indices indicating optimism among corporate executives. Economic activity in the United States remains stable, and the labor market shows no significant changes. Corporate surveys are exceptionally strong, indicating that managers overseas are extremely optimistic. Europe is also showing growth, even as natural gas prices rise, a development that could pose a risk for Europe, given that we are in the middle of the refueling season. This could put the European region at a competitive disadvantage, but this negative impact is not yet reflected in the current data. China’s economy, on the other hand, has lost momentum due to weakening demand.
VIG EUR Portfolios
We made changes in both of our euro-denominated model portfolios, which have different risk exposures. We increased the weighting of the VIG Emerging Markets ESG Equity Investment Fund in both the more conservative “prudent” portfolio and the “aggressive” portfolio, which follows a bolder investment strategy. The significant price decline in July on the South Korean and Taiwanese stock markets also presents a good entry point here; incidentally, we had reduced the Fund’s weighting last month precisely because of overvaluation and the resulting increased likelihood of a correction, just in time. However, we reduced the still-expensive developed market exposure (VIG Active Beta Flexible Allocation Fund) and the bond allocation (VIG Developed Market Short-Term Bond Investment Fund) by the same proportion. We reduced the latter because expected interest rate hikes could devalue government bonds, which currently offer higher yields.
VIG USD Portfolios
In the US dollar-denominated portfolios, following the approach taken in the Hungarian forint and euro-denominated portfolios, we increased the allocation to more attractively valued emerging market equities to 10%, and to 15% in the “Dynamic” model portfolio. This was financed by reducing the weight of the more expensive developed-market-focused VIG Active Beta Flexible Allocation Fund and, to a lesser extent, by also reducing the weight of the VIG Short-Term Bond Investment Fund.
We are responding to rising inflation partly by reducing bond allocations, as an increase in the general level of yields lowers the value of previously issued bonds. At the same time, the high allocation to the VIG Panoráma Absolute Return Investment Fund may also offer attractive opportunities. The Panoráma Fund aims to provide protection against the adverse effects of inflation without imposing sectoral or geographical restrictions on its investments.
Detailed information on the consideration of sustainability aspects is available on our website: https://www.vigam.hu/en/esg-investments/
Disclaimer
This is a distribution announcement. Detailed information is needed to make a well-founded investment decision. 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 Asset Management’s website (www.vigam.hu). The costs related to the distribution of the fund (buying, holding, selling) can be found in the fund’s management regulations and at the distribution outlets. Past returns do not predict future performance. Please note that in comparison with other investment funds, the return achieved may be affected by differences in the reference index and therefore the investment policy.
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.
The Asset Management’s license number for managing alternative investment funds (AIFM) is: H-EN-III-6/2015. The Fund Manager’s license number for UCITS fund management (collective portfolio management) is: H-EN-III-101/2016.