September was a good month for the region and for the Nevsky Eastern European Fund. This was largely driven by news from the United States, where the Fed made an announcement about open ended QE3.
As a result, the Fund saw growth of 3.8% during September. This compares with a 4.1% rise for the peer group average.
Given the Fed’s actions, the decision was taken to plough more money into Turkey and Russian holdings, resulting in a reduction in the amount of cash being held.
There were some concerns surrounding the poor macro economic fundamentals in Western Europe, particularly with reference to the possibility of these having a knock-on effect elsewhere. Despite this, strong gains were seen in Hungary and Poland.
In fact, both Polish and Hungarian markets rose by 8.5% in US terms during the course of the month. In part, this was helped by the stronger Euro.
With weak economic fundamentals and plenty of liquidity (being provided by Central Banks), the Fund Managers have judged that it is prudent to maintain a relatively high cash balance at this period in time.
Overall, the Fund held 10.4% of the overall value in cash. 57.1% of the Fund represents investments in Russia, with 11.5% in Turkey, 11.1% in Poland and 4.4% in Hungary. The remainder is split evenly between the Czech Republic and Kazakhstan.