The fund focuses on equity markets in Russia and other CIS (Commonwealth of Independent States) countries. Indirect exposures, i.e. companies that are traded elsewhere but still generate a significant proportion of their sales and profits in the fund’s investment region – are also eligible for investment. The team focuses on stock picking and targets a relatively high tracking error of 5-10%. Derivatives may be used to achieve the investment objective.
The fund is managed by SEB´s Eastern European team which is based in the Region, near to the companies they invest in. All team members are Eastern European nationals. The fund is managed by Sulev Raik, who is responsible for the fund’s ongoing strategy and, ultimately, for fund performance. The portfolio manager is supported by sector specialists. The team is based in Tallinn, Estonia.
The team applies a stock-picking approach focusing on analyzing single-company fundamentals. It looks for attractively valued companies and tries to identify emerging trends in company financials at an early stage. Company meetings add value to the financial analysis and a fair amount of attention is paid to corporate governance issues, since improving corporate governance has been one of the value creating factors in these markets. The portfolio manager also scans sell-side research and occasionally requests evaluation of any ideas found in this area by the other team members.
The team focuses on stock picking within sectors combined, to some extent, with sector selection. It expects to have about 90 percent of the portfolio invested in Russian equities, with about 10% invested in other CIS markets, predominantly Ukraine and Kazakhstan. The fund typically holds 40-60 stocks. Superior new investment alternatives can act as sell triggers, positions are exited when sustained deterioration in the fundamentals are determined.