Equities Sell Off Worldwide, New Europe Once Again Resilient
January caught many investors off guard as equity markets around the world corrected sharply, contrary to the nearly consensus view that Developed Markets would continue to reach new highs and volatility is likely to remain low. Once again, Emerging Markets fared worse than their Developed peers as foreign investors pulled out assets while the scarcity of local capital meant that asset prices had no domestic support. Slowing growth in China, devaluation in Argentina and political unrest in Turkey and Ukraine were among the top concerns in January, which saw the MSCI EM TR index drop 4.5% in euro terms.
In respect to our home markets, New Europe again proved to be relatively resilient in adverse conditions as the wider Stoxx EU Enlarged TR index declined 2.4%. Trigon New Europe Fund continued to show that it can outperform in difficult conditions as it ended the month in positive territory with a 0.4% return. All four of the Fund’s main strategic calls, which we highlighted in our 2014 Strategy Report, have already offered relative value over the first month of the year. Our contrarian overweight on Slovenia paid off most as the chosen companies returned on average 7% in January. We continue to also like Romanian and Czech companies at today’s valuations and we believe that local currencies will continue to be much more resilient in this volatile environment than their high current account deficit peers in Asia, Turkey and Latin America. We are also pleased to announce that Trigon New Europe Fund has won a Lipper Fund Award for a second consecutive year as the best Emerging Europe equity fund based on three-year performance. Lipper is a Thomson Reuters company.
Russian equities had another poor month in January as investors continued to pull out of Russian equities and the MSCI Russia TR Index fell 8.2% in euro terms. Trigon Russia Top Picks Fund declined 10.1% in January, mostly on the back of poor performance from small and midcaps. Russia continues to be by far the cheapest large Emerging Market as it trades on an average P/E of 4.5 and at a 58% discount to MSCI EM Index. When the outflows turn around, Russia may well see a very sharp surge in asset prices.
Past performance of the fund does not guarantee or indicate future performance of the fund. More detailed data about the performance of the funds in different time periods is shown in the monthly factsheets. The value of the fund units may increase and decrease over time, therefore there is no guarantee that the investors get back the amount invested in the fund. The risk factors of the fund are described in further detail in the prospectus of the fund.