CEE Expertise

Our managers have first started investing in 1994 on the fledgling CEE markets with primary focus on domestic fixed income and equities. In consideration of specific market dynamics and in particular the narrowing of Hungarian domestic opportunities the focus had been gradually shifting since 2008 to encompass a broader CEE regional exposure.

In equity portfolios HOLD runs a number of strategies, the most relevant to this mandate is perhaps the Concorde Equity Fund – representing an equity long only absolute return strategy, with a benchmark for the purposes of performance fee calculations. A factsheet for this fund is available separately. Please also note that apart from the actual Fund we also run similar mandates for a number of our institutional clients.

Another potentially interesting fund may be the Concorde Central European Equity Fund – a benchmarked CEE fund. A factsheet for this fund is available separately Our benchmark following portfolios in general performed at or over their benchmarks in 85% of the cases over the past ten years*.

In terms of geographic coverage for a CEE product HOLD Asset Management’s portfolio managers tend to focus on the Polish, Czech, Austrian, Slovenian, Croatian, Hungarian and Romanian markets, on the grounds that our team can provide the greatest value added in these geographies. This is due not only to geographic proximity but also the understanding of market dynamics and investor psyche on these markets, as well as the long term in depth and continued following of relevant investment opportunities on these markets. The portfolio managers have regular meetings with the management of relevant companies in the region whether they are currently in our portfolio or not. In terms of individual positions HOLD’s portfolio managers are typically looking for a minimum of 20% potential outperformance to invest in a company in the region.

*Source: HOLD Asset Management, further details available.


The upside in CEE
We believe that based on current valuations CEE provides a significant upside. CEE stock markets are excessively undervalued based on Schiller’s CAPE (cyclically adjusted P/E) ratio. Shiller P/E is the ratio of the current price and the last 10 years’ average, inflation adjusted EPS. The Schiller P/E is a more reasonable market valuation indicator than the general P/E ratio because it eliminates fluctuation of the ratio caused by the variation of profit margins during business cycles.

Source: Concorde Asset Management

Source: HOLD Asset Management

In terms of the countries covered in the CEE region by our portfolio managers, the coverage of the Austrian market may need further explanation. Although Austria is typically not regarded as part of CEE our managers believe that a number of companies listed on the Vienna exchange have significant operations and economic exposure to the CEE region and therefore may be in certain circumstances used as a good proxy for various segments of the CEE market.

To address your question with regards to current preferences within the region, our managers are positive on Romania, and certain opportunities in Croatia. They don’t at the moment have significant exposure to Slovenia but have seen good opportunities come through there in the past. The Czech and Hungarian markets are reasonably small and therefore limited, but due to our depth of understanding they can throw up some good investments. Poland is a very significant component of the region, albeit quite fully valued in the view of HOLD’s portfolio managers.