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Responsible growth potential at our next-door neighbours

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A practitioner's view on investing in CEE …

A practitioner's view on investing in CEE
Thomas Motsch, Fund Manager - Erste-Sparinvest KAG - Austria

Published in: Economy & Finance, Business

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    • 1. Responsible growth potential at our next-door neighbours A practitioner's view on investing in CEE
    • 2. Agenda CEE Overview The ESPA VINIS STOCK EUROPE EMERGING Fund Our SRI Methodology Contact Details
    • 3. ESPA WWF STOCK UMWELT ESPA VINIS CASH ESPA VINIS BOND ESPA VINIS STOCK AUSTRIA ESPA VINIS STOCK EUROPE ESPA VINIS STOCK GLOBAL ESPA WWF STOCK CLIMATE CHANGE 2001 2002 2003 2004 2005 2006 2007 2008 ESPA VINIS STOCK EUROPE EMERGING ESPA’s fund management has long term experience in the CEE region as well as in SRI Timeline Responsible Investment Funds WWF… Partner for theme funds VINIS… Brand of sustainable funds V erantwortung (Responsibility) , I nnovation , N achhaltigkeit (Sustainability) , I nvestment , S icherheit (Safety)
    • 4. EU 15 EU enlargement 2004 EU enlargement 2007 negotiation for enlargement possible candidates for enlargement extended investment universe Investment Universe The investment Universe comprises countries of Central Eastern Europe including Russia
    • 5. Lessons learned
      • hardly any “dark green” pure play stocks listed on the stock exchanges, (renewable energy projects are not listed)
      • sustainability performance shows east-west slope : the more you go east, sustainability plays a subordinate role, subsidiaries of Western companies tend to outperform from an ESG point of view
      • global recession has revealed particular economic facts in CEE: consumer demand was irresponsibly high debt-financed, on a company level equity ratios seem higher in CEE than in Western Europe
      • improvements in sustainability performance tend to be more a company specific phenomenon than an overall trend
    • 6. CEE Consumer demand Infra-structure Investments Commodities Our fund’s structure focuses on growth themes Main Growth Themes
      • Increase in demand
      • Growing traffic
      • Infrastructure improvements to achieve EU levels
      • AM investments out of the region still in early stages
      • AuM showing enormous growth rates
      • High potential: Insurance & service sector, banks
      • Catch-up potential
      • Upper middle class established
      • Substantial resources in
      • Russia and former CIS states
    • 7. Agenda CEE Overview The ESPA VINIS STOCK EUROPE EMERGING Fund Our SRI Methodology Contact Details
    • 8. The SRI research is based on exclusionary and stakeholder/best-in-class criteria Stakeholder criteria include the assessment of six stakeholder groups: Employees , Society , Customers, Market partners, Investors , Environment Exclusionary criteria
      • Armaments
      • Nuclear Energy
      • Addictive Drugs
      • Gene Technology
      • Gaming
      Stakeholder Criteria/ Best-in-Class
      • Analysis & evaluation are undertaken on 4 different levels
      • Principles & Strategies
      • Management Systems & Organisation
      • Products & Services
      • Program, Activities & Results
    • 9. Details on Climate Change issues in CEE
      • Climate change is an important issue for assessing ESG performance in CEE (criteria are emission of gases like C O ² , Methane, CFCs; energy consumption & sources; measures to reduce the impact on climate change)
      • high number of companies focusing on natural resources and energy in CEE, we select only the “cleanest companies” in those controversial sectors
      • Awareness for climate change in CEE still on low levels but improving
      • Average rating of climate change indicators in CEE region only slightly below Austrian levels (B- in Austria versus B-/C+ in CEE)
    • 10. Companies are rated based on a scale that ranges from A+ to C- The (SRI) evaluation scale and the CSR rating process behind range from the grade ‘ A+ ’ (innovative) to the grade ‘ C - ‘ (strongly regressive). The ratings are based on a point system, where ‘A+’ is equal to 100 points (upper limit) and ‘C-‘is equal to -100 points (lower limit). SRI Evaluation Scale
    • 11. Every company is screened and rated based on a variety of criteria Example for Rating Methodology
    • 12. VINIS Management Approach – four layers
    • 13. Agenda CEE Overview The ESPA VINIS STOCK EUROPE EMERGING Fund Our SRI Methodology Contact Details
    • 14. Why to buy Emerging Europe?
      • Growth expected to be higher in major Emerging Europe countries than in the US or Europe
      • Exports still high in Emerging Europe countries despite reduction of dependency in last decade. Therefore growth in the CEE region is supported by a global economic recovery evidenced by leading indicators
      • Low interest rates in developed countries and unprecedented liquidity forcing investors to look after higher yielding and riskier assets
      • Emerging Europe equities are no longer cheap, but they are still priced at a 25% discount to European equities on a 12 months forward PE basis
    • 15. ESPA’s Investment Process Top-Down Country- Allocation Technical Sentiment Valuation Macro Politics _________ 150 Stocks Riskmanagement Riskreports / Riskmonitor / Performance Attribution Investment Universe Emerging- Markets Time zone Eastern Europe _________ 500 Stocks Bottom-Up Stock- Selection Technical Sentiment Valuation _________ 90 Stocks Portfolio- construction Absolute Risk Exposure 90%-100% Active Risk Implemen- tation Trading Buy / Sell Discipline Portfolio 60-90 Stocks Filter Liquidity Filter ________ 150 Stocks
    • 16. ESPA VINIS STOCK EUROPE EMERGING Investment-Universe: Currencies Type and Style: Equity Fund, SRI ISIN: (T) AT0000A09YL3 Benchmark: MSCI EM Eastern Europe 10-40 Management Fee: 180 bps Volume as of 10/31/09: 6.9 Mio.EUR Performance since 10/06/08 Performance as of 10/31/09 (since 06/10/08): relative Performance (MSCI Eur. Emerg.): Performance as of 10/31/09 (since 12/31/08): relative Performance (MSCI Eur. Emerg.): - 25.83 % + 5.36 % + 47.98 % - 25.26 % Vimpel Comm – RU MOL – HU Hrvatske Telekom – CRO Grupa Lotos – PL Novolipetskiy Metallurg – RU 6.41% 6.38% 5.38% 5.13% 4.74% Magnitogorskiy Metallurg – RU Komercni Banka – CZ Cesky Telecom – CZ Magyar Telecom – HU Verbund – AT 4.73% 3.92% 3.77% 3.46% 3.17% Austria Slovenia Croatia Serbia Hungary Czech Republic Poland Rumania Bulgaria Turkey Estonia Lithuania Ukraine Russia Top Positions
    • 17. Agenda CEE Overview The ESPA VINIS STOCK EUROPE EMERGING Fund Our SRI Methodology Contact Details
    • 18. Wolfgang PINNER, MBA Head of SRI team Experience : 20 years Funds: ‚ ESPA VINIS STOCK GLOBAL‘ ‚ ESPA VINIS STOCK EUROPE EMERGING‘ ‚ ESPA WWF STOCK UMWELT‘ Martin CECH, CPM Deputy head of team Experience: 19 years Funds: ‚ ESPA VINIS CASH‘ ‚ ESPA VINIS BOND‘ Robert HEIDINGER, CPM Senior Fund Manager - Equities Experience: 8 years Funds: ‚ ESPA VINIS STOCK EUROPE‘ Thomas MOTSCH, CIIA Senior Fund Manager - Equities Experience: 4 years Funds: ‚ ESPA WWF STOCK CLIMATE CHANGE‘ ‚ ESPA VINIS STOCK AUSTRIA‘ Alexander OSOJNIK Analyst Experience : 4 years ESPA SR Investments – Team
    • 19. Contacts ERSTE-SPARINVEST KAG Institutional Distribution – International Habsburgergasse 2, A-1010 Vienna, Austria www.sparinvest.com Stephan Molzahn Senior Manager +43 50100 19965 [email_address] Albert Stöger Senior Manager +43 50100 19935 [email_address]
    • 20. Disclaimer "This is an advertisement. Our languages of communication are German and English. The latest version of the Prospectus (and any changes thereto) has been published in the “Amtsblatt der Wiener Zeitung”, in accordance with the provisions of the Austrian Investmentfondsgesetz [Investment Funds Act]. Copies are available free of charge to interested parties at the registered offices of both ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H. and Erste Bank der oesterreichischen Sparkassen AG. The most recent publication date and details of any other collection offices are published on the ERSTE-SPARINVEST KAG website (www.sparinvest.com). This document serves to provide additional information to our investors and reflects the knowledge of its authors at the time of going to press. Our analyses and conclusions are of a general nature and do not take into account the personal needs of our investors in terms of income, fiscal situation or attitude to risk. This is not a personal recommendation. It should be noted that past performance is not a reliable indicator of the future performance of a fund."