Vontobel Fund – European Equity Income Plus launched March 2025 in Europe; outperformed reference index with lower volatility

European Equity Income Plus: Year One Review | Vontobel

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European Equity Income Plus: One Year On

Launched in March 2025, the Vontobel Fund – European Equity Income Plus (EEIP) addresses a key question for many investors: how can equity investments be combined with attractive, regular income and a balanced risk profile?

The fund draws on three complementary building blocks:

Quality dividendsform the foundation of the Fund. It invests in 30 to 35 high-quality European companies selected for their balance-sheet strength and the sustainability of their earnings. Please note, that in some cases single-stock and sector concentration can add portfolio risk and limit diversification.

Enhanced incomeis generated by selling call options on shares that are already held in the portfolio (so-called covered calls). When these options are sold, the investor receives a payment upfront, known as an option premium. This premium is kept regardless of whether the option is eventually exercised. In return for this additional income, the fund accepts the possibility of selling the shares at a set price, which may be lower than the current market price if the share price increases sharply after the options are sold.

Dynamic participationsteers the portfolio’s overall risk. In unusual market conditions, the portfolio is actively adjusted. When markets become more uncertain or risky, exposure is reduced with the goal to limit losses. When conditions improve, exposure is increased with the goal to benefit from rising markets. This active management approach aims to manage both sharp declines and strong rallies.

Together, these building blocks pursue a clear goal: stable income across market phases, while also providing a more defensive profile.

The European Equity Income Plus Fund is designed to provide investors with regular income over time and is managed by a team with extensive experience in both stock selection and derivatives. While the Fund aims to generate attractive distributions, these may vary depending on market conditions and are not guaranteed. Overall, the target is an annual distribution of seven percent.

The first distribution covered the five months from launch to the end of August 2025 and came in at around five percent pro rata. Annualized, this corresponds to more than ten percent and was therefore above our target.

After one year, our target remains unchanged: exposure to European equities, enhanced income and a more defensive profile—especially in difficult market phases.

Looking back on the first year

The Fund’s first year was marked by significant market volatility, during which the strategy’s three building blocks were able to prove themselves. EEIP was launched just a few days before President Trump’s so‑called “Liberation Day”. Because the covered-call strategy had not yet been fully implemented at that point, the portfolio was additionally hedged tactically via dynamic participation. This helped reduce drawdowns. During the subsequent rapid market rebound, active tactical adjustments also helped to limit any disadvantage versus the reference index.

In the fourth quarter, our stock selection delivered a positive performance even as markets rose. The new year also started constructively, before escalating geopolitical tensions prompted early defensive measures. In March, all three building blocks contributed positively to performance. Overall, the Fund ended its first year clearly above its reference index, with lower volatility and smaller drawdowns, while the first distribution in November exceeded expectations.

At the start of the Fund’s second year, the environment remains challenging. The Iran war and its impact on global energy markets currently dominate market developments. The Strait of Hormuz remains largely blocked and oil prices are high, which is also affecting inflation and purchasing power. Economic indicators remain broadly constructive for now, but the full impact is likely to become visible only in upcoming data releases.

If the conflict were to persist, an environment of weak growth and high inflation would be particularly difficult for equity markets. A resolution cannot be ruled out, however—especially given domestic political pressure in the United States ahead of the midterm elections in the autumn.

The first year of the Vontobel Fund – European Equity Income Plus has shown that our investment strategy can navigate turbulent markets under very different conditions. We are entering year two cautiously, focusing on energy and defensive equities, active covered-call activity and tactical hedges. At the same time, we remain vigilant so we can respond to new developments.

Find out more about our strategies for stable income and a well-balanced portfolio structure.

Stable income—Adapting to a new reality

Market volatility, geopolitical tensions, and high valuations continue to shape today’s investment environment. Explore three income sources that can provide a more stable and reliable foundation for your portfolio.

Dividend:A dividend is a portion of a company’s earnings distributed to shareholders, typically on a regular basis (e.g., quarterly). Dividends provide investors with a stream of income in addition to any capital appreciation from owning the stock.

Covered Call:A covered call is an options strategy where an investor holds a long position in a stock and sells (writes) call options on that same stock to generate additional income. This strategy can limit the upside potential if the stock’s price rises significantly, as the investor may be obligated to sell the stock at the strike price. Please note that selling call options on positions in the portfolio limits the upside potential of the portfolio and exposes the investor to additional derivatives-related risks.

Hedgingdescribes the steps taken to offset the risk of a loss or unwanted gain, for example by hedging the risk of foreign currency exposure, an investor can benefit from holding a diverse range of global companies without being exposed to global foreign exchange movements.

Derivativeis a financial security whose price is determined based on an underlying benchmark or asset such as stocks, bonds, commodities, currencies, interest rates, or market indexes. Examples are futures, options and credit default swaps.

Distribution policyof a fund defines the dividend distribution for its share classes to investors. Accumulating share classes reinvest the income received from the fund holdings back into the fund and do not distribute to shareholders. Distributing shares typically make cash payments to shareholders on a periodic basis.

Indexis a portfolio that holds a broad range of securities, based on pre-defined rules. Indexes such as the FTSE 100 or DAX 30 are used to represent the performance of particular markets and thus act as a reference point for performance measurement of other portfolios. An index used as reference for performance comparisons, is called a “reference index”.

Optionis a derivative, financial instrument whose price derives from the value of underlying securities, like stocks. Call

put options give buyers the right (but not the obligation) to buy

sell an underlying asset at an agreed price and date.

Volatilitymeasures the fluctuation of a fund’s performance over a certain period. It is most commonly expressed using the annualized standard deviation. The higher the volatility, the riskier a fund tends to be.

Note: The definitions provided above are based on standard financial concepts and are intended for informational purposes.

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