BEE : Tough year for Baring Emerging Europe
Over the year to the end of September 2014 Baring Emerging Europe’s net asset value fell from 846.2p to 695.9p – on a total return basis a fall of 15.9%. This was 2.6% worse than their benchmark (the MSCI Emerging Markets Europe 10/40 Index) which fell by 13.3%. The return to shareholders was -15.4%. They dipped into their revenue reserves to maintain the dividend at 19p.
The Chairman says they were caught off guard by Russia’s annexation of the Crimea and the collapse of the Russian market that followed. They were overweight in Russia ahead of this and say this accounts for their underperformance of the benchmark. They also say that the falls in share prices often bore no relation to the quality (as they perceive it) of the underlying company. On the plus side they say stock selection in Poland was a positive as was being underweight in Turkey.
The manager’s report singles out a holding in Russian conglomerate Sistema, which contributed to the fund’s underperformance, that he implies has been targeted by the Russian State as a means of achieving State control over its largest asset, Bashneft, an oil & gas company.