Klaus Bockstaller discusses strategies his team uses to manage Barings guf Eastern europe
The Baring GUF Eastern Europe fund run by Klaus Bockstaller examines five macro and micro factors ' growth, liquidity, currency, management and valuation. It is ranked two out of 117 in the equity Europe (Central and East) over five years with a 54.9% return over that period.
Bockstaller has a team of four analysts that look at these five factors on a country-by-country basis. Each analyst has their own countries to examine and they look at the factors according to various sectors. These include oil and gas, telcos and technology, financials, utilities and pharmaceuticals.
Investment manager Stuart Richards says: 'Individual macro-economic drivers are very important in Eastern Europe as the individual economic conditions in each country are very different. Unlike Europe, where the macro-economic situation in each country is similar and companies can be picked individually among these, in Eastern Europe each country has different macro conditions that have a very big bearing on investment decisions.'
For example, if the macro outlook for a country looks bad, then a low weighting is given to that country. Factors that Richards looks at to see if the country has a good macro outlook include a stable government and sound fiscal policies.
Barings uses a database that follows a number of drivers on a macro and micro level. These include industrial production, retail sales, wage growth, unemployment figures, interest rates, and short-term money markets. These are examined in relation to the five factors ' growth, liquidity, currency, management and valuation.
However, each factor is examined differently depending on whether the analyst is looking at it from a top-down or bottom-up perspective.
For example, in a macro perspective for growth, Richards looks at the quality and direction of growth in a country if the direction of GDP is positive and looks strong.
On a macro level for liquidity the analysts look to see the internal cash flow for a country, while a similar process done on a micro level looks at the cash situation of a particular company. In regards to currency on a macro perspective, a country's current account and trade balances are examined, while on a company perspective the level of exports and imports are examined.
A country's fiscal policy is examined for management while on a company viewpoint, factors like corporate governance are looked at. In relation to valuation, the growth and history of a country is examined as well as a company's value compared to its peers and the likelihood of future growth.
If one of these factors changes then the company is re-evaluated and it is looked at in relation to its country and peer groups. The analyst looks to see if the stock is likely to go up further or fall and makes a decision based on this.
For example, if a company goes up 10% compared to its peers the analyst will look to see if any of the fundamentals in the five categories have changed and if there is a possibility the stock will go up further or whether it should be sold.
The team that analyses stocks works closely together and has informal chats throughout the day on how individual companies are going. At the end of the week a formal meeting is held to discuss companies. In addition, regular meetings are held with the global sector teams as Eastern Europe follows trends from Western countries. For example, telecom stocks are very transparent and the trends in Eastern Europe follow that of the western world.
The Baring GUF Eastern Europe fund launched five years ago and over the course of its existence has had one manager change. Although the original manager, Martin Taylor, left in September last year, the fundamental strategy of how the fund is run has not changed.
The fund is Dublin domiciled and the fund size is $299.3m. The minimum investment is $5,000, with an initial fee of 5% and an annual fee of 1.5%.
about the manager: Klaus bockstaller
EMEA equity investment manager, London
Global emerging policy team
Investment experience: Eight years
Klaus joined Baring Asset Management in September 2000 as head of Emerging Europe, Middle East and Africa within the Global emerging markets equity team.
Klaus manages the Baring Emerging Europe Trust and the Baring Eastern Europe Fund. He joined the firm from UBS Brinson, where he was a portfolio manager for Eastern Europe funds. He focused on all emerging markets within the European time-zone. Klaus has specialised in Russia, Turkey, Hungary and South Africa and was the global co-ordinator for investments in commodity companies within the emerging market universe. He received a degree in political economics from the University of Freiburg in 1993.
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