Your Gateway to SEE MarketsCITYWIRE VIENNAFORUM 2013,12 March 2013
KD Asset Management Leading South East European Asset Manager                                   * Please see disclosures o...
Since 1994, the KD Group has developed into oneof the largest privately owned insurance groupsin SEE                      ...
Unique combination of experience, local  presence and global allocation capabilities                                      ...
Investment Process                TOP-DOWN: Country/sector allocation   Macro-                             Cycle &        ...
South East European region
We are an SEE asset manager with a focus on the emerging European UnionCEE: Central & East EuropePoland:     EU Member 200...
Reasons to invest in the SEE & CEE regionThe uniqueness of the EU convergence process in the region combinedwith a relativ...
Correlation Great diversification opportunities both against developed and emerging markets  1 0.9 0.8 0.7 0.6 0.5 0.4 0.3...
Convergence Liberalisation + Privatisation + Structural Reforms = Lower Cost of Capital & Higher GDP There is evidence th...
Pattern of past recoveries and the currentsituation    250               Crisis composite index               MSCI World A...
Attractive valuation in SEESEE blue chip basket compared to cycle normalised EPS35                Top cycle valuations hit...
KD BalkansThe easiest way to get an exposure to the SEE regionInvestment policy:                                          ...
KD BalkansTop 10 Holdings & Geographical Breakdown                                                              Romania an...
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Kd skladi part 1

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Kd skladi part 1

  1. 1. Your Gateway to SEE MarketsCITYWIRE VIENNAFORUM 2013,12 March 2013
  2. 2. KD Asset Management Leading South East European Asset Manager * Please see disclosures on back page
  3. 3. Since 1994, the KD Group has developed into oneof the largest privately owned insurance groupsin SEE KD Group PLC The leading asset The first Slovenian specialist management company in life insurance company The 3rd largest insurance SEE company in Slovenia Developed the unit-linked 13 investment professionals market in Slovenia  still Unique position in health located across the SEE region considered the most insurance (Slovenia, Croatia, Bosnia, innovative company in the life Presence in Slovenia and Montenegro, Romania and segment Serbia Macedonia) responsible for The fastest-growing Croatian managing approx. EUR 500m unit-linked life company
  4. 4. Unique combination of experience, local presence and global allocation capabilities  KD Asset management has 18 years of investing experience and has been extensively investing in the SEE 14 mutual funds region for more than 10 years KD Funds, 6 institutional mandates Slovenia 9 investment  Local analysts speak the local language and understand professionals the market dynamics  Local knowledge - analysts are located throughout the3 mutual funds region where:1 investment professional  the markets are extremely inefficient,  what is required are specialised skills, which are KD similar to those in private equity investing, and KD SAI KD Fondovi, Asset Investments Managemen  there is a diversity of languages. Macedonia , Romania t  KD analysts have an extensive information network which is imperative when dealing in these relationship- based markets 1 mutual funds 1 investment professional  KD analysts can access tightly held/concentrated shareholdings  In addition to managing mutual funds in Slovenia, Croatia, KD Romania and Macedonia, KD also manages two Investments 5 mutual funds , Croatia privatisation funds in Bosnia and an investment company 1 investment professional in Montenegro. Further, it manages two additional mandates (a Russian fund and a CEE fund) for a Slovakian asset management company
  5. 5. Investment Process TOP-DOWN: Country/sector allocation Macro- Cycle & Relative Global economics Risk matrix earnings money allocation & strategy potential flow guidelines Analytics Portfolio construction Portfolio revision Initial Investible Idea Approved screening universe generation stock list BOTTOM-UP: Stock selection 5
  6. 6. South East European region
  7. 7. We are an SEE asset manager with a focus on the emerging European UnionCEE: Central & East EuropePoland: EU Member 2004, pop. 38mCzech Rep.: EU Member 2004, pop. 10mHungary: EU Member 2004, pop. 10mSEE: South East EuropeSlovenia: EU Member 2004, pop. 2mRomania: EU Member 2007, pop. 21mBulgaria: EU Member 2007, pop. 8mCroatia: EU Member exp. July 2013, pop. 4mMacedonia: EU Candidate 2004, pop. 2mSerbia: EU Candidate 2012, pop. 8mBosnia & Herzegovina: pop. 4m Core Region Narrow Strategic Broad Strategic Region Region
  8. 8. Reasons to invest in the SEE & CEE regionThe uniqueness of the EU convergence process in the region combinedwith a relatively low correlation provide attractive opportunities forinvestorsCorrelation + Convergence = AlphaShort-term drivers Long-term drivers Privatisation process ongoing  Increasing political stability The cycle is turning for the majority of East  Low correlation with other equity marketsEuropean markets  Countries are either EU members or in the EU We see a new bull market forming over the course of accession processthe next 5 years  Healthy economic growth prospects Top-down macro factors will loosen their grip but stillremain important  Inexpensive but highly educated workforce Stock-specific bottom-up factors will be more in the  Increasingly positive investment climatespotlight  Capital markets are being liberalised Risk aversion will fade and risky assets willoutperform  Adoption of the euro typically acts as a stimulus for M&A activity So it’s time for more aggressive positioning 8
  9. 9. Correlation Great diversification opportunities both against developed and emerging markets 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Stoxx Balkan ex TR & GR vs MSCI AC WorldData: Bloomberg;Annual correlations calculated Stoxx Balkan ex TR & GR vs MSCI Emerging Marketsbased on weekly data in EUR MSCI Emerging Markets vs MSCI AC World 9
  10. 10. Convergence Liberalisation + Privatisation + Structural Reforms = Lower Cost of Capital & Higher GDP There is evidence that CEE and particularly SEE markets are not yet integrated into global portfolios since their expected returns reflect higher stand-alone risk excluding their lower covariances with global portfolios Convergence towards the EU will attract foreign capital flows into the region as markets become more liberalised and countries complete the privatisation process. This will have a positive impact on the cost of capital, increasing economic activity and potentially further increasing the trend growth rates of the economy Moving towards integration with the EU will force SEE countries to speed up the structural reforms needed to satisfy EU requirements which would further reduce the cost of capital and contribute positively to economic growthOpportunity:Investors willing to participate in the early stages of this process are more likely to reap thebenefits of equity prices not reflecting the risk contribution to global portfolios but instead thehigher stand-alone risk, resulting in a higher than expected return on equity. 10
  11. 11. Pattern of past recoveries and the currentsituation 250 Crisis composite index MSCI World AC MSCI Emerging Markets 200 Lower band - historical volatility (2std. Dev.)In Upper band - historical volatility (2std. Dev.)d STOXX Balkan ex-Greece & Turkeyex MSCI Frontier Markets 150edVal 100ueEU 50R Local high before crisis = 100 0 07 08 09 10 11 12 13 14 15 16 Synchronized date (years)
  12. 12. Attractive valuation in SEESEE blue chip basket compared to cycle normalised EPS35 Top cycle valuations hit 30x normalized EPS. Some markets like Slovenia30 experience even loftier valuations reflecting the tendency of SEE markets toward extreme overshooting.25201510 5 1999 – 2013 average P/nE: 11,9 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  13. 13. KD BalkansThe easiest way to get an exposure to the SEE regionInvestment policy: KD Balkans - Changes in unit value (in EUR)The funds investment objective is long-term capital growth, 2.9which will be pursued through the active management of 2.7investments in equities in the Balkans. At least 85% of the 2.5funds assets is placed in shares, and at least 80% is 2.3allocated to shares in the region comprising Slovenia,Croatia, Bosnia and Herzegovina, Serbia, Montenegro, 2.1Macedonia, Romania, Bulgaria, Greece and Turkey. Less 1.9than 10% of the funds assets is allocated to units of other 1.7funds. 1.5 31/10/2010 31/01/2010 30/04/2010 31/07/2010 31/01/2011 30/04/2011 31/07/2011 31/10/2011 31/01/2012 30/04/2012 31/07/2012 31/10/2012 31/01/2013Management company KD Funds, LLCFund’s incorporation date 24.02.2006NAV (€000) on date: 31.01.2013 22.320 Equity SoutheastFund type EuropeSubscription fee 3.00% Past returnsManagement fee 2.49% 1-year 5.58%Ongoing charges (Jan. 2012 - Dec. 2012) 2.86% 3-year (cumulative) -28.53%PTR (Jan. 2012 - Dec. 2012) 35.99% 5-year (cumulative) -71.19%Geographical focus Southeast European Average weekly return 0.17% countries Standard deviation of weekly return 1.45%BenchmarkSTOXX® Balkan TMI ex Greece & Turkey Index 100% 13
  14. 14. KD BalkansTop 10 Holdings & Geographical Breakdown Romania and Serbia are the fund’s largest overweights. Top 10 holdings as at: 31.01.2013 We like Romania’s economic prospects, reform and OMV PETROM SA 9.29% NAFTNA INDUSTRIJA SRBIJE 6.7% privatisation agenda and relatively low political risk in BRD-GROUPE SOCIETE GENERALE 6.10% the near future. In Serbia, we expect 2013 GDP growth KRKA 5.70% in the 2% range and further fiscal consolidation with a BANCA TRANSILVANIA 5.26% potential IMF precautionary deal boosting credibility. FONDUL PROPRIETATEA SA/FUND 4.31% The overweight in Serbia results from conviction calls on AIK BANKA AD 3.03% companies like NIS and AIK bank. PETROL D.D. 2.77% KOMERCIALNA BANKA BEOGRAD 2.52% Croatia is the largest underweight. We see a budget SOJAPROTEIN 2.41% planned on unrealistic forecasts and expect a revision in the next couple of months. GDP could well be in the Other Macedonia Bulgaria 1% negative territory in 2013, with tourism as one of the 3% 4% Bosnia and best performing sectors. Herzegovina 4% Romania Croatia 32% Slovenia is a tactical underweight due to political 10% uncertainties which are currently at elevated levels. Announced privatisation plans could be a boost to the stock market but their realisation depends on political Serbia 15% will. Bulgaria and Macedonia are equal weights. 14 Slovenia 31%

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