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The Baring Eastern Europe Fund generated returns of 8.6% in US dollar terms over the first quarter of 2011, lagging the 10.3% returned by the wider MSCI Emerging Europe 10/40 Index*. Although this was a positive start for Eastern European equities, the first quarter was also a period of heightened volatility for investors as the European sovereign debt crisis rumbled on while political unrest across the Middle East and North Africa, coupled with the Japanese earthquake, served to push commodity prices higher.
In terms of strategy, the Fund continues to target opportunities where good conditions for structural, long-term growth prevail and where valuations are attractive. We remain focused on Russia as the biggest market in the benchmark and the largest overweight in the Fund. While high oil prices have clearly helped the Energy sector, it has also hastened a huge improvement in Russia´s budget deficit and this should support government spending and economic growth over the coming months.
At the sector level, the Fund continues to favour Financials. This is largely due to the overweight in Russian Financials, where a favourable macroeconomic backdrop should lead to strong loan growth and a reduction in non-performing loans. Elsewhere, we also believe that the Turkish market is starting to look attractive again following a period of subdued performance in the first quarter. We hold the view that Turkish banks are attractive on a medium-term horizon, notwithstanding recent unorthodox measures implemented by the central bank to curb lending.
Please click the links for further details on the Baring Eastern Europe Fund:
Click here to read the Baring Eastern Europe Fund brochure.
Click here to read the Baring Eastern Europe Fund quarterly investment review.
Click here to view the Baring Eastern Europe Fund factsheet.