Baring Set to Launch Eastern Europe Fund
May 10, 2011
HONG KONG -- Fund-management company Baring Asset Management Ltd. will launch the Baring Eastern European Fund in the middle of September, the firm's London-based senior investment manager Martine Teena said. The fund will invest in equity markets in Eastern Europe, a region that Mr. Teena predicts will likely yield 20% to 25% returns a year over the next three years. Driving his bullishness are the region's high growth rates of 5% a year, and cheap price/earnings multiples averaging nine to 10 times projected 2011 earnings. By contrast, many Asian markets are trading at more expensive valuations of 16 to 18 times estimated 2011 earnings, he noted. What's more, Eastern Europe has strong competitive advantages, with low wage rates and high productivity growth of 14% to 15% a year, he said. Political and economic risks are also declining. ``The command economies have become stable market-orientated democracies that are fully committed to NATO and European Union membership,'' he said. Within the region, Mr. Teena currently prefers Hungary, Poland and Russia. He plans to allocate 20% of the new fund in Russia, 20% in Hungary and 30% to 35% in Poland. The rest of the fund will be spread through the Czech Republic, Turkey and smaller nations such as Croatia. Both Poland and Hungary are plays on Eastern Europe's competitive advantages, he said. He sees the manufacturing sectors in those countries as particularly attractive, noting, for example, that Hungary's pharmaceutical stocks are trading at just 10 to 11 times projected 2011 earnings. Meanwhile, in Russia, which Mr. Teena considers alluring because of its vast pool of natural resources, he favors companies with cheap assets and strong cash flow. Baring Asset Management, a London-based subsidiary of Dutch financial services company ING Groep NV, presently operates two closed-end funds investing in Eastern Europe. The Baring Eastern European Fund will be the company's first open-ended vehicle investing in the region.
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