29.11.2011

Marios Demetriades

Portfolio Manager

Piraeus Bank (Cyprus) Ltd.


Investing in a region spanning three continents and with some of the youngest and fastest growing populations in the world, the WIOF Eastern Mediterranean Performance Fund offers investors the chance to take advantage of opportunities in countries with sound long-term prospects and economic fundamentals.

 

OVERVIEW

The Fund invests predominantly in equities and equity related securities in four key markets in the Eastern Mediterranean region: Turkey, Egypt, Cyprus and Greece. It is ideal for anyone interested in specialised capital markets and who is aware of the opportunities, and risks, connected with investing in emerging markets.

 

SOUND FOOTING

Much of the recent focus on the region has been concentrated on Greece and its financial troubles. For this reason, the investment manager is aiming to limit exposure in Greece and Cyprus to almost 5% each. Political developments in Egypt over the last nine months have also been very much in the news. But this has overshadowed what are in fact very sound fundamentals in each of the Fund’s focus countries:

 

Turkey has significant long-term prospects. It accounts for about 1% of global population and also boasts one of the youngest populations in the world, creating the potential for impressive future growth. In Turkey, over 26% of the population is under 15 and it is expected that over the next ten years the country’s share of global GDP will increase significantly. Turkey has also overcome problems of political instability which dogged it in the first half of the last decade and has seen significant structural changes and privatisations that have boosted growth and competitiveness. It was recently upgraded to Investment Grade by ratings agency Standard & Poor’s and is predicted to have the highest average growth among OECD countries by 2016. It has also started accession talks with the European Union which is expected to lead to more structural changes and further help growth.

 

Egypt’s long-term prospects are equally impressive. With a similar size population and demographics - 31% of the population is under 15 – as Turkey, it too has sound fundamentals underpinning a bright future. Its share of global GDP is also expected to increase significantly in the next decade.

Cyprus has a small but stable economy which is very service-oriented. It has been affected negatively by both the crisis and its close business links with Greece. However, the Cypriot economy is in much better shape than that of Greece and its economic prospects have been enhanced by the announcement of the start of gas exploration in the region between Cyprus and Israel. The first results are expected by the end of this year.

 

Greece has had its problems recently. But despite this, the investment manager believes it will be in much better shape once all necessary structural changes are undertaken. This is expected to create significant opportunities in the future.

 

GROWTH PROSPECTS

Growth in the region has been hit by the 2008 financial crisis. Particularly Greece, due to its structural problems, and to a lesser extent Cyprus, has felt the effects. The Turkish economy recorded a drop in GDP of almost 5% in 2009, but bounced back in 2010 to register the highest GDP growth in the world after China. This growth has continued in 2011, though a natural slowdown is expected in 2012. Finally, while Egypt was unaffected by the crisis, its growth slowed dramatically in 2011 following the revolution early this year. But it is expected that growth will bounce back to pre-revolution levels after the November elections and the subsequent advent of greater clarity in the political scene.

 

 

OUTLOOK

The Fund’s performance has this year been affected by both the Greek crisis and the Egyptian revolution. But the prospects for the near and mid-term future look better. The market in Egypt is expected to recover following elections which should usher in more political stability. Meanwhile, valuations remain low and attractive. In Turkey, the market and the currency have now stabilised and a positive performance is expected for the next quarter while in Cyprus debt remains low and international business is strong despite the crisis in Europe. The situation remains unclear in Greece and, as mentioned, the current aim is to limit exposure there to 5%.

 

INVESTMENT MANAGER

Piraeus Bank (Cyprus) is a wholly-owned subsidiary of Athens-based Piraeus Bank Group. Established in early 2008, it provides full retail, corporate and international banking as well as wealth management and asset management services. Its investment management team, made up of highly-qualified and experienced specialists, focuses on regional markets including Greece and Cyprus.

IMPORTANT NOTE:

This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.