Eastern European Fund Report – October 2012

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.

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.