Schroders has launched an emerging Europe regional fund. The Schroder Emerging Europe fund is a Luxe...
Schroders has launched an emerging Europe regional fund.
The Schroder Emerging Europe fund is a Luxembourg-based Sicav that aims to capture the growth expected from EU convergence stories throughout the region.
In the past, countries' stock markets have surged as a result of attempts to meet the EU economic criteria. This happened in Spain, Portugal and, lately, Greece. The Greek stock market tripled in value between 1998 and the end of 1999, and it is this kind of growth that the Schroders team is trying to capture.
Fund manager Stefan Bottcher said: "We believe that this fund will be very attractive to our European clients, who are keen to invest in regional funds.
"In our view, the projected global growth and commodity cycle should support the growth of the more 'classical' emerging economies in Europe, providing attractive returns for investors."
The fund is run by the eight-strong European and Middle East team at Schroders.
This team already runs two other East-European funds - the $2.5bn European sub-set of the Schroders Global Emerging Markets fund and the $320m Guernsey-based East European fund.
Although not actively in the market until March, the fund was launched in mid-January and since then it has grown to $30m, although Schroders expects it to reach $50m by the middle of the year and $100m by the end. The fund uses the MSCI Emerging Europe Index, but with the Greece weighting cut in half.
This is because not only does Greece occupy an enormous 44% of the index, but also Schroders expects Greece to be moved out of the emerging markets index and into the mainstream European index within nine months.
Cutting the weighting will reduce the disturbance to the fund's portfolio when this happens. The fund's mandate gives it a great deal of flexibility. Some 15% of the fund can be in non-benchmark countries, such as Romania, Croatia and Estonia, as well as in the Middle East.
At the moment the only non-listed country in the fund is Estonia, where Schroders are participating in the success of Estonia Telecom.
One big performance worry for the fund would be caused by Eurozone economic troubles, making the markets bearish on joining either the EU or EMU.
Gabor Sitanyi, one of the other fund managers on the team, is fairly confident this will not happen in the near future.
He said: "It seems that Europe has gone through the hardest period in terms of the euro being weak and the economy stagnant. Now the main economies are recovering and GDP growth should reach about 2%-3% this year."
The annual management charge is 1.5% for 'A' & 'B' class shares. There is a 0.6% distribution charge for class 'B' shares. The minimum investment for class 'A' and 'B' shares is E1,000 and $500,000 for class C.
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