Eastern European Fund Report – June 2011

A difficult month for global markets saw the MSCI Emerging European Index fall by some 6.8% (in US$ terms). By comparison, the Eastern European Fund, from Nevsky Capital, saw a fall of 6.3%.

Taking the region in its entirety, it’s clear that Central Europe saw the best performance, with the Polish market stronger than elsewhere. Indeed, the fall of 3.7% in Poland during the month of May is something that really catches the eye.

The fund managers have decided to increase the Polish exposure, although there is still a feeling that the market is not particularly attractively valued. The increasing exposure can mainly be seen as a case of identifying selected companies with more attractive valuations.

One disappointing market was Turkey, which saw a fall of 13.3% during the month. This may be seen to be reflection of domestic economic policies that have led to rising prices domestically, with inflation hitting a rate of 7.2% in May. Given this situation, the fund managers reacted by decreasing exposure to this market.

Overall in May 2011, the fund had 59% of investment allocated to the Russian market, with 12.3% allocated to Poland.

Since the foundation of the fund, an annualised return of almost 23% has been achieved, based on US$ terms.