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
The positive news regarding the reopening of the Strait of Hormuz had a beneficial effect on the macroeconomy. The world market price of oil fell rapidly and significantly, and peace talks between the United States and Iran are moving in the right direction, all of which has brought a sense of relief and, with it, improved consumer confidence, and may help temper inflation expectations. This is exactly what is needed: the global economy remains weak, but a lasting peace would help reduce global uncertainties.
For now, stagflation is the most likely scenario: low growth, high inflation. The U.S. economy is currently on a “no landing” trajectory. The labor market is strong, and inflation jumped to 4.2% in May. Fed Chair Kevin Warsh’s debut in June took a “hawkish” tone that the market took as a sign of a potential tightening trajectory (suggesting higher interest rates), which led to a strengthening of the dollar and expectations of interest rate hikes. In the eurozone, interest rates were raised as early as June due to surging inflation, but despite Germany’s infrastructure package, no turnaround in growth is expected, so the stagflationary environment persists.
VIG EUR Portfolios
We have made changes to both of our euro-denominated model portfolios, which have different risk exposures. In both the more conservative “prudent” portfolio and the “aggressive” portfolio, which follows a bolder investment strategy, we significantly increased the weighting of the VIG Central European Equity Fund, which invests in regional stock markets, at the expense of the VIG Emerging Markets ESG Equity Investment Fund (the latter has significant exposure to Asian stock markets, where AI and technology companies, which account for a huge portion of the market, could be among the losers in a price correction). Tech companies, which are increasingly viewed as overvalued, pose a growing risk to the portfolio anyway, so we are also reducing the sector’s weight by selling shares in the VIG InnovationTrend ESG Equity Fund.
VIG USD Portfolios
We also made changes to the tactical allocation of the dollar-based model portfolio similar to those made to the euro-based one. In both the more conservative “prudent” portfolio and the “aggressive” portfolio, which follows a bolder investment strategy, we significantly increased the weighting of the VIG Central European Equity Fund, which invests in regional stock markets, at the expense of the VIG Emerging Markets ESG Equity Investment Fund (the latter has significant exposure to Asian stock markets; in South Korea and Taiwan, the AI sector accounts for a huge portion of the local stock markets, and technology companies could be among the losers in the event of a price correction). We are also reducing exposure to the share-price risk of increasingly overvalued technology companies by selling the VIG InnovationTrend ESG Equity Fund.
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.