March 2007FIM Emerging Europe1 Investing in Emerging Europe according to FIM Fonds Professionell...
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Transcript of March 2007FIM Emerging Europe1 Investing in Emerging Europe according to FIM Fonds Professionell...
March 2007FIM Emerging Europe 1
Investing in Emerging Europe according to FIM
Fonds Professionell Messe, Wien
Raoul Konnos, Fund ManagerFIM Emerging Europe
March 2007
1.1.2006Document Footer 2
Introduction of FIM
FIM Group
FIM Emerging market funds
Our investment process
March 2007FIM Emerging Europe 3
FIM Group in a nutshell
• Established in 1987 as a brokerage, asset management since 1994
• AUM (Dec. 2006) EUR3,0bn
• 2006 turnover EUR82m (+30%), EBIT 19m (flat Y/Y), 284 employees
• Apart from Finland FIM has offices in Stockholm and Moscow
• Icelandic Glitnir bank made a tender offer on FIM in February 2007
March 2007FIM Emerging Europe 4
FIM Emerging markets funds
• Forerunner in emerging markets fund products in Finland, AUM in emerging market funds total currently EUR750m
• First Russian fund introduced in Finland (1998)
• Focus on Eastern Europe (comprising of Russia, Russia Small Cap, Emerging Europe and Ukraine funds)
• Total of 10 emerging market funds currently, including funds for all BRIC-countries
March 2007FIM Emerging Europe 5
This is FIM Emerging Markets
Team work
Speed from ideas into action
Tracking error
Small and Mid-Caps
Benchmark
Company visits
Scepticism
ESSENTIAL
FAST
HIGH
YES
EXISTS
VITAL
HEALTHY
March 2007FIM Emerging Europe 6
FIM EM Investment Strategy
CORE HOLDINGS
PREFERENCE FOR DOMESTIC PLAYS VS. EXPORT SECTORS*
• To get local, not global exposure• Higher pricing power/profitability• Consumption growth • Infrastructure investments
INTERACTION
* Since inception of funds
GLOBAL TRENDS
• Regional generalists global sector views
• What sectors will perform, what should be avoided
SHORTER/MEDIUM TERM OPPORTUNITIES
• Global sectors demand/supply balance
• Local conditions
STOCK SELECTION
• Company visits, industry analysis• Regulation, pricing power,
structural changes• Valuation, liquidity• Management track, strategy
WE DO NOT WANT TO EXCLUDEANY OPPORTUNITIES
• Case by case analysis rather than mechanical screening
• Tactical aspects, M&A• Small Caps + non-benchmark stocks
– keeping in mind the liquidity
ACTIVENESS
• Ability to fast action• High individual responsibility rather
than consensus committees• Dynamic and enthusiastic team
open for new ideas
SHORTER TERM HOLDINGS
March 2007FIM Emerging Europe 7
FIM EM Investment Process
COMPANY AND ANALYST MEETINGS
IDENTIFYINVESTMENT THEMES
IDENTIFYSET OFCOMPANIES
RANK THECOMPANIES
EVALUATEINVESTABILITYRISKS
INVEST
• Market position• Valuation• Earnings quality/
sustainability
• The exposure of each sector/company to the trend
• Growth dynamics• LT pricing power• Profit momentum• What areas to avoid?
• Liquidity• Corporate
governance
• Timing - short term price development
• Price impact
PARALLEL VALIDITY CHECK/SEARCH FOR NEW IDEAS
CHALLENGEINVESTMENT THEMES
CHALLENGE THE CON-FIDENCE
CHALLENGE RANKING/VALUATION
EXIT/REPLACE WITH NEW THEMES
• Still valid?• Still significant?• Any better ideas?
• Story coming to an end?
• Need for sector rotation?
• Adjust company positions?
1.1.2006Document Footer 8
FIM Emerging Europe fund
A balanced approach on Emerging Europe
March 2007FIM Emerging Europe 9
Fund facts
• Launch date 4th October 2004
• Fund manager Raoul Konnos, since inception
• Annualised return +32,9% since inception
• AUM EUR52m (1 March 2007)
• Investment area: new EU countries and EU applicants
• Long-only equity fund
March 2007FIM Emerging Europe 10
Strong growth outlook in the entire investment area
Läh
de:
ING
0
5 000
10 000
15 000
20 000
25 000
0 1 2 3 4 5 6 7 8 9 10
GDP growth 2007e in %
GD
P/c
apit
a in
US
D (
PPP) Latvia
Hungary
Czech Rep.
Croatia
Turkey
Romania
LithuaniaEstonia
March 2007FIM Emerging Europe 11
12M forward looking P/E ratios for fund’s main markets and Russia
- 60 %
- 40 %
- 20 %
0 %
20 %
40 %
60 %
01 J anuary 2003 01 J anuary 2004 01 J anuary 2005 01 J anuary 2006 01 J anuary 2007
Rela
tive t
o E
uro
STO
XX
Czech Poland Hungary Russia Turkey EMEA
March 2007FIM Emerging Europe 12
Small cap exposure only on selected markets
I nvestment strategy Poland Turkey Hungary Czech Balkans* Baltics* *
Large X X X XMid & Small Caps X X X
* Romania, Bulgaria, Croatia** Estonia, Latvia, Lithuania
March 2007FIM Emerging Europe 13
Short-term outlook
• Spring correction has happened every year in last seven years
• Poland had become the leader among Eastern European countries with regard to nr. of listed companies and share liquidity
• Turkey will suffer from twin elections this year, although the valuations partly already reflect this
• The fund focus is on Poland, Romania and the Baltics
March 2007FIM Emerging Europe 14
Geographical focus on Poland, the Baltic countries and Balkans
FI M Emerging EuropeGeographical breakdown
Poland29 %
Turkey11 %
Hungary & Czech15 %
Balkans15 %
Baltics14 %
Other & cash16 %
BenchmarkGeographical breakdown
Poland30 %
Turkey30 %
Czech20 %
Hungary20 %
March 2007FIM Emerging Europe 15
Sector focus on private consumption demand, including banking, consumer goods and construction
FIM Emerging EuropeSector breakdown
Banks32 %
Investment companies
11 %Consumer goods
& services24 %
Refining & utilities
2 %
Construction & real estate
14 %
Telecom9 %
Other8 %
BenchmarkSector breakdown
Banks44 %
Consumer goods & services
11 %
Refining & utilities22 %
Metal5 %
Telecom15 %
Construction & real estate
3 %
March 2007FIM Emerging Europe 16
Fund performance since inception (4 Oct. 2004)
9,0
11,0
13,0
15,0
17,0
19,0
21,0
23,0
25,0
10.04 1.05 4.05 7.05 10.05 1.06 4.06 7.06 10.06 1.07
Emerging Europe WIG (30 % ), PX (20 % ), BUX (20 % ) ja ISE 100 (30 % )
March 2007FIM Emerging Europe 17
CV, Raoul Konnos, fund manager
• 13 years of capital markets experience
• Joined FIM AM in July 2004 and started FIM EE mutual fund on 4 October 2004
• Previous 8 years at premium Nordic broker D. Carnegie (in Helsinki) in various positions (Head of research, Equity research & sales)
• BBA (University of Stockholm, Sweden), CEFA (Swedish School of Economics, Helsinki)