The Standard & Poor’s View

We’ve been taking a look at the S&P report that covers the Nevsky Capital Eastern European Fund. It makes for interesting reading and we thought that it might be useful to present some of the highlights here at Nevsky News, where they will be available to individuals and those looking to learn more.

Nevsky Capital Martin Taylor

The report was produced in August 2011 and the opinion offered in the report is dated July 2011. It begins by discussing the fact that the Nevsky team focuses on two funds, with the Eastern European Fund obviously being one of them. It’s remarked upon that there have been substantial inflows into the fund – meaning that more people were looking to invest in this fund. That will certainly have pleased Martin Taylor and Nick Barnes of Nevsky Capital, giving them more scope.

Nevsky Capital Nick Barnes

Indeed, it’s noted that the team had taken the decision to soft close the fund. At the time, the team consisted of two fund managers, two economists and no fewer than 6 sector-specific analysts. It’s to be expected that a substantial team would be required.

In general, between 25 and 40 holdings are reckoned to be held at any one time. S&P suggest that a very active approach is taken to management, with a concentration of time and effort on studying the fundamentals of countries, sectors and individual companies.

The fund is awared a AAA rating from S&P. What that means is that the fund is seen to demonstrate the highest measures of quality within its sector. This information is based upon the investment process, although this only tells part of the story.

There is also a view taken on the consistency of performance achieved by the management, with specific consideration given to how such levels of performance compare with other funds that operate with similar objectives.

Reading through the report, it’s clear that S&P have given the fund something of a “thumbs up”, but it’s clearly for each of us to observe and to research, prior to making investment decisions.

When you carry out your own research, you may regard such analysts’ reports as being part of the wider package of information that’s made available to you. They may be informative, or you may feel that they are simply to be ignored. That choice is very much your own, leaving you to make the right decisions for your own, personal circumstances.

Behind the scenes

When we look behind the scenes at any investment fund, we tend to find the full story. In truth, producing results is rarely the work of one or two individuals. The reality is that it would be difficult for such a small team to compile the amount of information that’s necessary to really judge the potential value offered by differing investments.

Nick Barnes Nevsky Capital

This means that it needs a group of real analysts to sit down and to look at specific countries, markets and companies. To begin with, it’s fair to say that this must involve a lot of graphs. For those of us who may not have been great at school, that probably doesn’t sound like a lot of fun!

Martin Taylor Nevsku Capital

That’s right, it means a lot of addition, subtraction, multiplication and division. Although there will certainly be computer programs available at Nevsky Capital to make such data transformations easier, the team led by Martin Taylor and Nick Barnes must still find themselves relying heavily on mental arithmetic in the first instance. That’s the way that many of us look to narrow down options.

Nick Barnes Nevsky Capital

It’s only once those initial, near-immediate, calculations have been carried out that we can seek to move on. That may well be the same for you, depending upon your own chosen role. Admittedly, you may not be focused on managing an investment fund, but it’s easy to see how the same rules might generally apply.

Nevsky Capital Martin Taylor

Ultimately, the team will be looking for signs that particular investments offer value. By the same token, they will be attempting to identify those that should be avoided. Using computer programs and algorithms will only take things so far. Beyond a certain point, it clearly becomes necessary to use the experience that must come from years of investing.

What can the rest of us learn by watching such teams in action? Although we may be investing on a smaller scale, it seems clear that we can also look to make informed decisions. That must be at the heart of all that we do.