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East Capital Balkans

East Capital Balkans

NAV

24.35 EUR

1 day

+0.64%

YTD

+2.68%

Date

2025-04-25

Sustainability

Article 8

NAV

37.69 SEK

1 day

+1.64%

YTD

-1.57%

Date

2025-04-25

Sustainability

Article 8

NAV

27.94 EUR

1 day

+0.64%

YTD

+2.88%

Date

2025-04-25

Sustainability

Article 8

East Capital Balkans mainly invests in shares of companies in Greece, Romania, Turkey and Slovenia. As market conditions change, the fund may also invest in other countries in the region such as Bosnia and Macedonia.

The fund’s strategy is to invest in companies that benefit from long-term development trends such as EU convergence, growth in domestic consumption and investment in markets that are in an early phase of transition. The fund has an all-cap mandate and actively seeks exposure to smaller companies. The fund can have up to 10% of its net asset value invested in a single issuer, with most holdings being under 5%. The fund has a low turnover rate.

The investment style is based on a long-term perspective, fundamental analysis and active stock-picking, combining growth with value.

In the first quarter of 2025, the East Capital Balkans Fund delivered a return of 4.6%, reflecting the fund’s strategic focus on high-quality, undervalued companies across the Balkan region. The fund’s strong performance was driven by strong stock selection and timely portfolio adjustments, with key contributions from Slovenia (+19.2%), Greece (+20.7%), and Romania (+10.6%), though Türkiye (-7.3%) weighed on overall returns due to domestic political shocks.

The Balkan region’s sentiment in Q1 2025 was buoyed by a mix of optimism and uncertainty on the global trade outlook. Prospects of a ceasefire or peace deal in Ukraine lifted Eastern European markets, as reduced geopolitical risk spurred hopes of regional stability and economic recovery. Meanwhile, Germany’s stimulus measures added a tailwind to Eurozone and Eastern European GDP growth forecasts, with spillovers supporting manufacturing-heavy economies like Romania. However, Türkiye diverged from this trend, underscoring its increasingly domestically driven narrative.

Türkiye’s market lost 10% in Q1, a rare divergence from the Eastern European rally tied to Ukraine peace hopes, reinforcing how domestically focused its dynamics have become. The quarter was marked by heightened volatility following the arrest of a prominent Turkish opposition leader, which triggered a sharp 17% drop in stocks in lira terms, before a stabilisation back to near November 2024 levels. This political shock raised risks to Türkiye’s economic recovery, threatening its disinflationary path and delaying anticipated rate cuts. The lira, while vulnerable, is in a stronger position than during past crises—central bank reserves are significantly more robust than in 2018, and the current account deficit is narrower. The central bank’s proactive measures, including hiking the overnight rate and closing the weekly funding window (effectively a temporary policy rate increase), helped stabilise the currency and signal policy effectiveness. As we met the head of the Turkish Central Bank and the finance minister Simsek in London in January, it was good to see that the strong commitment to the policy normalisation measures was confirmed by actions amid a time of political pressure.

Despite these efforts, recent lira volatility has spooked some fixed-income and equity investors. We now expect the central bank to miss its year-end inflation targets, with rate cuts likely pushed further out. That said, a deeper economic slowdown could emerge, driven by lower consumer confidence and companies’ willingness to invest, potentially accelerating rate cuts in the second half of 2025. Earnings outlooks are highly uncertain, and while modest rebounds are possible, a strong recovery to prior highs seems unlikely in the near term. Top performers included Enka (+5.5%), a construction company with expertise in large power generation projects likely to participate in Ukrainian reconstruction, Logo Yazilim (-2%), a resilient SaaS compounding company, and Do&Co (0.7%), an airline catering company listed in Austria. Though more consumer-exposed holdings, like Bim (-18.7%), faced pressure from weaker sentiment. Our defensive positioning in Turkish bonds of about 11% at the beginning of the quarter also contributed to the relative return, as these short-term fixed income instruments had much more stable returns of 0.4% to -1.4%, still offering a return of circa USD 20% on an annual basis. Though seldom used in the fund, the investment team now views fixed-income securities as an appealing choice due to heightened risks in Turkish equity markets in terms of risk adjusted returns.

Greek holdings returned an impressive 20.7%, driven by macroeconomic tailwinds and standout performers like Alpha Bank (+41.7%) and National Bank of Greece (+29%). The country benefitted from continued economic improvement, with tourism revenues sustaining GDP growth and unemployment dipping further. German stimulus lifted regional GDP, and rising defence spending boosting defence-related industrials like our Greek holding Theon International, surging 97.4% on both widespread expansion and potential backlog growth. Titan Cement (+10.7%) added to gains as its US listing plans progressed, while Optima Bank (+25.9%) capitalised on index inclusions and strong results, with net interest income and loans in Q4 2025 growing 13% and 49% YoY respectively, and 2024 ROTE of 25.1%. They will probably be the only Greek banks with EPS growth in 2025 due to strong loan growth. Greek banks remained a bright spot, offering high shareholder remuneration yields (8% projected for 2025) and discounted valuations (ca 30% below Italian/Spanish peers), positioning them well as European stimulus supports regional investment flows. Negative sentiment from 2024’s European political uncertainty has largely dissipated, reinforcing Greece’s turnaround narrative.

Romania posted a solid +10.6% return, underpinned by Banca Transilvania (+10%) and Med Life (+14.4%), despite political uncertainty lingering from late 2024’s chaotic elections. The centrist government, now being formed, is expected to prioritise fiscal consolidation (targeting a deficit reduction from 9% in 2024 to 3% of GDP by 2030) and maximise EU fund absorption, bolstering long-term growth. Med Life’s growth in the underpenetrated healthcare sector remains a highlight, with 26% 4Q 2024 and high-teens revenue increases expected in the future. Romania’s convergence to European standards continues, though manufacturing ties to Germany’s automotive chain face risks from potential Trump-era tariffs. German stimulus, however, offers a counterbalance, supporting GDP forecasts.

The East Capital Balkans fund’s 9.27% return in the first quarter reflects our ability to navigate a complex landscape, delivering value through active management. Looking ahead, we are optimistic about key 2025 developments: a potential Ukraine peace deal enhancing Eastern European stability, German stimulus lifting regional GDP, and rising defence spending boosting defence-related industrials. Despite Türkiye’s challenges, the fund trades at an attractive 7.8x P/E for 2025, with a 4.4% dividend yield, offering compelling growth potential amid cheap valuations and resilient balance sheets. On the other hand, we see potentially increased volatility due to the US tariffs being implemented around the world. While the potential direct negative impact on the region seems to be limited, we are waiting for more details and the response from countries in our regions to assess the full impact. We remain committed to uncovering high-quality opportunities across this dynamic region.

 

 

Performance in EUR net of fees.

This publication is not directed at you if we are prohibited by any law in any jurisdiction from making this information available to you and is not intended for any use that would be contrary to local laws or regulations. Every effort has been made to ensure the accuracy of the information, but it may be based on unaudited or unverified figures or sources. The information should not be used as the sole basis for an investment. Please read the Prospectus and the KID, which are available on the fund page.

Lipper Egle 730X480 3

East Capital Balkans - Winner for the second year in a row of the LSEG Lipper Fund Awards (Europe)

The East Capital Balkans fund has been awarded the LSEG Lipper Fund Award for Europe 2025 (Equity Emerging Markets Europe), celebrating its exceptional performance over the past three and five years.

Geographical Split

Sector Allocation

Largest Holdings

Fund facts

Fund

East Capital Balkans A EUR

ISIN

LU0332316016

Launch date

2014-04-10

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

2.31%

Management fee

1.90%

Benchmark

-

Fund

East Capital Balkans A1 SEK

ISIN

LU1941809938

Launch date

2022-03-31

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

2.35%

Management fee

1.90%

Benchmark

-

Fund

East Capital Balkans R EUR

ISIN

LU0972918535

Launch date

2013-09-30

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

1.70%

Management fee

1.50%

Benchmark

-

Risk indicator

Funds with risk class 6-7 can have sharp decreases or increases in value.

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More information

Reporting of the fund's historical returns does not consider inflation.

Past performance of the A SEK share class prior to 1 October 2013 relates to the Swedish registered fund East Capital Balkans, which from 1 October 2013 is a feeder fund to the A SEK share class.

Past performance of the A1 SEK share class prior to 01.04.2022 relates to the A SEK share class of the Sub-fund whose performance prior to 01.10.2013 relates to the former Swedish registered East Capital Balkans which from 01.10.2013 was a feeder fund to the A SEK share class of the Sub-fund until 31.03.2022.

2022-04-01

The merger of the Funds East Capital Balkan, East Capital New Europe, East Capital Russia and East Capital Eastern Europe with East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe (respectively) has been carried out in accordance with the submitted merger plan, which was approved by Finansinspektionen (the Swedish Financial Supervisory Authority) on 15 February 2022.

East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe thus ended on 1 April 2022.

Following the merger, former shareholders in East Capital Balkan, East Capital New Europe, East Capital Russia and East Capital Eastern Europe now own shares in East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe.

More information about the merger, such as the auditor's opinion on the exchange relationship, can be obtained from the management company East Capital Asset Management S.A. upon request.

Investing through a financial intermediary may impact the investor’s rights to compensation in the event that compensation is paid due to errors or non-compliance.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by East Capital. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.mscibarra.com)