increased asset allocations in former soviet union good for Pictet's eastern european trust
Increased asset allocation to the booming Russian market has driven up the NAV and share price of the Eastern European Trust managed by Pictet Asset Management.
The trust, run by Douglas Polunin and Antoine Khmelnitsky, outperformed its benchmark by 133 basis points for the 12-month period ended 31 January, according to the firm's final accounts released at the end of March.
Over the time period, the ordinary share price of the trust rose 10.2% in sterling, while the NAV rose 6.7% in dollar terms.
The trust aims to achieve long-term capital growth by investing in a diversified portfolio of securities of companies operating in the former Soviet Union, Eastern Europe and Mongolia.
Hugh Aldous, chairman of the trust, said: 'During the year, the managers moved out of banks and financials and largely out of telecoms but took a significant position in mobile telephony in Russia. They continued to hold a strong position in pharmaceuticals and rebuilt a position in oil and gas.'
Aldous said that exposure to Poland and the Czech Republic was also reduced, while exposure to Russia was rebuilt, catching the market in the second half of the year. He added that gearing was taken up to more than 10% during the year, but has now been reduced to about 4%.
Aldous said: 'Russia is now completely fascinating. The index is back where it was in the heady days of 1997. More importantly the Putin government seems determined to introduce a true market economy built on reform, fair taxes, domestic growth and increasing corporate governance and security.
'The change from corporate outrage to some recognition of corporate governance in just four years is astonishing. There remains, however, a huge amount to do in reforming the laws and truly protecting investors. We hope the momentum for this underleveraged economy will continue.'
The portfolio managers select stocks that are well managed, with considerable potential and those which are fundamentally undervalued. Aldous said their top-down economic and market assessments of the countries have proved sound and those disciplines have enabled them to pick up and hold stocks in relatively volatile markets for good fundamental reasons.
Head of UK intermediary distribution
‘Promising lead’ or ‘Back to the lab’?
PA360 2019 revisited
Complaints triple in past year
Our weekly heads-up for advisers