28.02.2013

Dejan Rajbar

Portfolio Manager

NFD d.o.o.


With a successful economic transformation behind it, underpinned by a strong and continuing growth story and offering historically undervalued stocks, Emerging Europe is an enticing prospect for investors. The WIOF Emerging Europe Performance Fund offers the chance to take advantage of the region’s investment potential, giving access to a raft of markets whose growth is set to outpace those of developed countries for years to come.

 

OVERVIEW

Investing in equity and equity-related securities of companies located in or exposed to growth in Central and Eastern European countries, the sub-fund has an objective of long-term capital growth in EUR. It is an ideal choice for any type of investor, including those looking for an absolute return within an equity product.

 

SUCCESSFUL TRANSFORMATION

Emerging Europe’s successful transition from a centrally-planned to functioning market economic system has driven enormous growth for the last 15 years. The region has seen massive FDI inflows for more than a decade and real GDP growth that has outpaced both the Eurozone and the US. It is expected to continue to do so in the coming years and according to some estimates, the Emerging European region will record growth rates that are more than double that of Western Europe and above that of the US by 2016, underlining the fact that Emerging Europe’s growth story remains firmly intact. Meanwhile, other economic fundamentals in the region present a comforting picture for investors. The fiscal position of most Emerging European countries is better than their developed counterparts. Ratios of debt to GDP are overall lower, in some cases drastically so, than many of the world’s leading economic nations.

 

 

REGIONAL VALUE

Along with benefiting from higher GDP growth and sound economic health, Emerging Europe also offers stocks which, taking the region as a whole, are historically undervalued, particularly those in Poland and Russia where valuations and economic growth are especially attractive. Dividend yields on Emerging European stocks are also very attractive, offering investors the chance to take advantage of income and potential appreciation. As the current environment continues to be one of low yields, dividends are becoming even more important in portfolios held by investors looking to build a strong portfolio of firms delivering handsome and reliable dividends.

 

CONSUMER GROWTH

The region’s relatively rude economic health and future growth prospects are underpinned by the continuing expansion of the region’s middle class. As more jobs are created, wages grow and wealth is spread, investment opportunities will continue to emerge as consumer spending patterns mirror those seen across the developed world. In particular, Russia’s growing middle class is driving domestic consumption and credit expansion in the country. Domestic growth is also a fundamental economic driver in other countries in the region. For instance, Poland has fared much better in comparison to most European countries since the financial crisis began. While many economies around the world plunged into recession in 2008 and 2009, Poland avoided contraction because of the domestically-driven nature of its economy.

 

 

OUTLOOK

Markets should have a better year in 2013 as growth, which was slow but steady in 2012, begins to pick up on the back of better sentiment and improvement in the US and Chinese economies. This should also be the case for many Emerging European markets, with some expected to achieve standout performance. Although Emerging Europe will not be completely immune to the Eurozone’s troubles, any potential downturn in the region should reach a low by the close of the first quarter, with economies generally picking up soon after. The recent trend of decreasing risk aversion should also continue into 2013, pushing markets upwards. The outlook for some of the region’s smaller markets, such as Romania and Croatia, has improved while key regional economies, such as Poland and Russia, are expected to maintain the outperforming growth rates they have registered in recent years. Poland in particular looks very attractive, with good valuations backed by a positive business environment and easing monetary policy. Plans to privatise hundreds of Polish companies through stock exchange transactions will help bolster the domestic capital market and economic competitiveness. Meanwhile, the central bank has pledged to lower rates if the economy slows – a move which could benefit the stock market as, historically, low rates have been good for equities.

 

INVESTMENT ADVISER

The Fund’s investment adviser is NFD d.o.o, one of the leading fund managers in Slovenia with a strong regional footprint. The company has been actively present in the Slovenian financial market since its foundation in 1994. One of the most experienced fund management teams in the region, it adheres to the highest standards of asset management and aspires to outperform in challenging European frontier markets in various asset classes.

 

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 17 December 2010 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.