BlackRock Emerging Europe (BEEP) seeks long-term capital growth by investing in companies doing business primarily in eastern Europe, Russia, central Asia and Turkey. It is London-listed and quoted in sterling, but its accounts are presented in US dollars. Its report for the year to 31 January 2017 shows shareholders’ assets of £123 million*.
Sam Vecht has managed BEEP since BlackRock took over its mandate in May 2009, with Chris Colunga as co-manager since March 2016. The portfolio focuses on 20 to 30 high-conviction holdings. Derivatives are used for hedging and investment purposes, subject to short positions not exceeding 10 per cent of net assets. At end-January the portfolio’s gearing was 3.1 per cent.
Share selection is based on political and macroeconomic insights combined with bottom-up company analysis, all of which is assisted by BlackRock’s formidable research platform. The managers look for companies translating revenue growth into free cash flow, and back those where the cash flow stream appears undervalued.
At end January, Russia accounted for 45 per cent of the portfolio and Turkey 21 per cent, with the balance in Poland, Ukraine, Greece, Czech Republic and Romania. Financials accounted for 42 per cent and energy 25 per cent.
BEEP’s sterling-converted net asset value (NAV) and share price total returns last year were 54.5 per cent and 55.8 per cent respectively, comfortably exceeding the 48.6 per cent gain on its benchmark, the MSCI Emerging Europe 10-40 index. A dividend of $0.075 was declared. Ongoing charges tightened to 1.2 per cent and should fall further following a cut in the annual management fee to 0.8 per cent of NAV.
BEEP’s five-year NAV total returns are ahead of its benchmark and sixth-best of 42 in its Morningstar peer group of funds investing in emerging Europe.
Shareholders are promised an opportunity to sell at NAV less costs prior to 21 June 2018.
*All figures are converted into sterling.
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