New Europe & Russia Continue to Underperform in Bullish Equity Markets
April
saw world equity markets picking up speed again as the feared spill-over from the
Cypriot banking disaster was avoided and as the European Central Bank was
expected to cut rates to all-time lows in another round of monetary easing from
the developed world. Emerging Markets, in comparison, have had a rather
mediocre year so far with the MSCI Emerging Markets index showing slightly negative
total return for 2013. Our
home markets of CEE and Russia have also had a lacklustre run with MSCI Russia
TR down 5.3% YTD and New Europe’s wider index (Stoxx EU Enlarged TR) already
down 7.4%. Such significant underperformance to both Western Europe and other
Emerging Markets is hardly explained by fundamentals, as both CEE and Russia
have a significantly better economic outlook than Western Europe. New European
equity valuations are also becoming increasingly attractive as a result of record-low
bond yields and in comparison to Western equities that have seen a spectacular
rally over the last year. Trigon
New Europe Fund continues to show very high resilience in these conditions as
it added 2.4% in April, while the benchmark index declined 1.0%. The Fund has
outperformed the index by over 10 percentage points YTD and its performance
stands at 2.9% for 2013. We are particularly pleased to have shown significant
outperformance in poor market conditions, which has allowed the Fund to show
both the lowest volatility and the highest return in its peer group over the
last 3-4 years. Russian
equities had also a tough run in April with MSCI Russia TR declining 4.7%,
further increasing the discount to other Emerging Markets equities that was
already the highest on record. Whilst corporate governance and other issues
remain a concern for investors in Russia, its nearly 70% discount to MSCI EM
Index seems well overdone and, in our opinion, offers a good entry point for
long-term investors. The companies in the MSCI Russia index currently trade at
an average P/E of 4.1x, in comparison to a P/E of 12.2x for the MSCI Emerging
Markets index and a P/E of 17.3x for the MSCI World index.
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.