12.12.2011

Martin Zezula

Portfolio Manager

Raiffeisenbank a.s.

A niche product which bucks trends followed by rival funds, the WIOF Emerging Europe Performance Fund offers investors impressive annual returns and access to the investment opportunities of a region with strong potential and a healthily-intact growth story.

 

STANDING OUT

The Fund invests primarily in a diversified portfolio of equity securities and equity-related securities of companies located in or exposed to
growth in Central, Eastern and South-Eastern Europe. The manager follows a strategy of maintaining an equity exposure of between 80% and 100% of the Fund’s total assets. But what makes it stand out is its unique focus. Most funds focusing on Emerging European stocks typically have a majority of assets allocated in Russia and Turkey, following their biggest market caps in the region but offering few opportunities to benefit from growth in Central Europe, the Baltics and the Balkans. But the WIOF Emerging Europe Performance Fund is different, concentrating on Central and South Eastern Europe and holding a maximum 10% investment in Russia and nothing in Turkey.

 

REGION’S VALUE

Emerging Europe offers investors not just the typically attractive characteristics of all emerging markets, but its own unique opportunities. While emerging markets are comparatively inexpensive on a traditional valuation basis - as measured by the MSCI EM index they are currently close to their cheapest levels since 1Q2009 - Emerging Europe seems to be an even better bargain in comparison to, for instance, Latin America and Asia.

 

SUCCESSFUL TRANSFORMATION

Emerging Europe’s successful transition from centrally-planned to functioning market economic systems has driven enormous growth for the last 15 years. The region has seen massive FDI inflows and for more than a decade, with the exception of the post-financial crisis year of 2009, real GDP growth in the region has outstripped both the Eurozone and the US. It is expected to continue to do so in the coming years, showing that Emerging Europe’s growth story, and the potential opportunities that come with it, is firmly intact.

 

Rast reálneho HDP (medziročná zmena v %)

The region’s fiscal position is also better than that of many developed countries. Ratios of debt to GDP are overall lower, in some cases drastically so, than many of the world’s leading economic nations. The economic status of three of Central Europe’s major economies, Poland, the Czech Republic and Hungary, has already been recognized. All are classed as “advanced emerging markets” by the FTSE group. The classification, which has also been given to countries such as Brazil and South Africa, recognises levels of national income, the development of market infrastructure and conditions for entry of capital. Comparing stock exchange performances also highlights how attractive the region is. Historical data shows the CECE Extended Index has, on an annual basis, regularly outperformed other comparative indexes.

 

Výkonnosť akciových trhov (v EUR; medziročne v %)

The nature of a globalised world means that events on developed markets will always influence regional stock exchanges. However, Emerging European countries hold another competitive advantage in that the majority of them have their own local currencies, whose depreciation could support economies in instances of faltering growth and market turmoil.

 

OPTIMISM FOR THE FUTURE

The outlook for the Fund’s focus markets is one of optimism. Markets are currently to a large extent pricing-in a recession scenario. But there is good reason to be cautiously optimistic about the months ahead. Corporate financials are good, macroeconomic data is currently pointing to a continuation of weak economic growth rather than a recession, and valuations are attractive. However, it would be impossible not to take into account the prevailing environment and the issue of European debt. Current market development is to a large extent dependent on politicians and investor sentiment and there is unlikely to be a more substantial market improvement until a sustainable and convincing political solution to the Eurozone’s debt problems is presented.

 

INVESTMENT MANAGER

The Fund is managed by Raiffeisenbank a.s. (Raiffeisenbank), a member of the Austrian Raiffeisen Financial Group whose history as a financial institution dates back more than 140 years. Raiffeisen Financial Group is among the strongest financial institutions in Central and Eastern Europe for commercial and investment banking, and currently operates in 17 countries. As of 31 December 2010, the Group's consolidated balance-sheet total amounted to EUR260bn.

 

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.