By Jenne Mannion The board of the Barings Emerging Europe Investment Trust (BEET) is proposing to in...
By Jenne Mannion
The board of the Barings Emerging Europe Investment Trust (BEET) is proposing to invest a portion of the fund in the Mediterranean region.
The board of BEET will write to shareholders requesting permission to invest up to 10% of the portfolio in countries including North Africa and Egypt if attractive opportunities are identified.
The mandate of the trust states up to 10% of the portfolio can be invested outside emerging Europe, but the board will seek permission to move ahead with investments in these areas.
Fund manager Rory Landman said: "In the past we have added significant value to the fund by moving out of certain areas and into others when the timing is right. By being able to move into the Mediterranean, when attractive opportunities are presented, this would be advantageous to the trust. Markets in Eastern Europe all dance to different tunes. For example there is a low correlation between Poland, Greece and Russia, which is advantageous because it means there is always some area that is performing. If we extend that to the Mediterranean, then we also extend the potential."
The annual results for BEET to 30 April showed net assets of the fund increased 51% to $410m over the year, against an increase of 31% in the BEMI Emerging Europe Index.
The fund benefited from the strong equity market performance in Turkey and Russia in which the fund has 55% of its assets on 30 April 2000. Both countries strengthened their governments and took steps to stabilise their economies during the year.
The major single area of investment is in Russia, which represents 32% of the portfolio. Landman said there are a number of positive factors in play. At a political level Putin has replaced Yeltsin as president, the first ever democratic transfer of power.
At an economic level, there is radical tax reform, and a budget surplus, which is clearly assisted by higher oil prices.
In central Europe, which represents 47.6% of the portfolio, the key areas are Hungary at 23%, Poland at 14.4% and the Czech Republic at 6.%. Other areas are Croatia and Estonia at 1.6% and 1.8% respectively.
Landman said: "Poland, Hungary and the Czech Republic are now EU satellites. Exports to the EU as a percentage of total exports is now 71.2% while FDI (foreign direct investment) from the EU is 69.4% of total FDI."
In the Eastern Mediterranean there is no investment in Greece, due to excessive valuations while Turkey represents 9.3% of the portfolio.
The trust's investment style combines a bottom-up and top-down approach. In looking at individual stocks the research team and fund managers consider a business' growth, liquidity, currency base, management and valuations. Barings analyses these factors in the context of the macroeconomic outlook.
Although the trust holds between 60 and 70 stocks, the top 20 holdings account for 75% to 80% of the fund, while the remaining holdings represent much smaller bets.
Reasons to be cheerful
Total investment reaches £9m
Medium to long-term capital growth