Investment Philosophy

Karoll Capital’s Investment philosophy - The 5 Investment Pillars:

Investment Process

Our Investment universe

Selection Filters:

4,000+ listed companies in CEE

Mkt cap & Liquidity

Investment Universe - 1,500

Corp Governance, Transparency, ESG

750

Sector Outlook & Company Competitiveness

500

Financial Strength

250

In-house Valuation

Survivors
150

Investment Constraints:

The Four S's of our Investment Process

Screen

1
  • In-house / external screening tools (Bloomberg, Reuters, X3, etc.)
  • Sourcing ideas from 3rd party research
  • Conference attendance
  • Company visits
  • ESG sector exclusions
  • Market intelligence

Study

2
  • In-depth analysis conducted in-house
  • Assessing sector dynamics
  • Studying business model and company’s ability to generate return > cost of capital
  • Identifying companies with improving margins and low debt levels
  • Calculation of intrinsic value employing DCF method; Fair value calculation based on peers comparison ► target price
  • Analyst proposal to PMs

Shape

3
  • Investment Committee decides on country and sector allocation limits
  • PMs decide on inclusion of stocks in portfolios and weight in line with mandate constraints and risk parameters
  • Benchmark unconstrained approach – at a country and individual stock level

Supervise

4
  • Regular review of portfolio components’ fundamentals
  • Exit discipline: excessive valuation; unexpected deterioration in fundamentals; loss of confidence in management; better alternatives
  • Monthly attribution analysis to determine how performance is affected by country/sector/stock selection and quantify true alpha 
  • Risk management: oversight by CRO and investment committee

Investment team meetings

Weekly meetings
PMs and analysts interact and exchange ideas
Monthly meetings
Portfolio reviews of mutual funds / managed accounts, attribution analysis Overview of market development ► modify portfolios if necessary
Quarterly meetings
In-depth analysis of investment portfolios Strategic asset allocation decisions
Ad-hoc meetings
Reaction based on trigger from the in-house surveillance system

Emerging Europe
buoyant region converging with the rest of Europe

  • incubator for fast-growing companies
  • increasingly participating in European & global supply chains - vast number of companies shifting production here

Central & Eastern Europe is a diverse region offering appreciable scale:

  • 200+ mln combined population

  • USD 2.5 + trln
    GDP

  • 4,000+ listed companies

  • USD 1+ trln total market cap

Emerging Europe

among the fastest growing regions

Country Group Name

Subject Descriptor

Units

Scale

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

World

Gross domestic product, constant prices

Percent change

Units

3.653

2.947

-2.667

6.605

3.645

3.493

3.292

2.785

2.963

3.216

3.216

3.179

3.121

Advanced economies

Gross domestic product, constant prices

Percent change

Units

2.284

1.872

-3.958

3.628

2.946

1.738

1.798

1.377

1.506

1.689

1.717

1.674

1.651

Euro area

Gross domestic product, constant prices

Percent change

Units

1.768

1.627

-6.016

1.220

3.533

0.401

0.855

0.806

1.185

1.348

1.297

1.204

1.129

Major advanced economies (G7)

Gross domestic product, constant prices

Percent change

Units

2.091

1.748

-4.216

5.816

2.617

1.852

2.593

1.228

1.379

2.119

1.625

1.595

1.568

Other advanced economies (Advanced economies excluding G7 and euro area)

Gross domestic product, constant prices

Percent change

Units

2.804

2.046

-1.585

5.917

2.781

1.845

2.236

1.766

3.507

2.157

2.152

2.057

2.044

European Union

Gross domestic product, constant prices

Percent change

Units

2.283

2.044

-5.514

6.421

3.668

0.596

1.116

1.156

1.478

1.605

1.563

1.789

1.434

ASEAN-5

Gross domestic product, constant prices

Percent change

Units

4.951

4.209

-4.416

4.073

5.492

4.072

4.634

3.966

3.947

4.216

4.342

1.726

4.523

Emerging market and developing economies

Gross domestic product, constant prices

Percent change

Units

4.674

3.738

-1.736

7.038

4.134

4.685

4.284

4.584

3.888

4.162

4.123

4.069

3.971

Emerging and developing Asia

Gross domestic product, constant prices

Percent change

Units

6.424

1.363

-0.503

7.754

4.677

6.054

4.572

4.535

4.602

4.848

4.587

4.677

4.508

Emerging and developing Europe

Gross domestic product, constant prices

Percent change

Units

2.380

2.522

-1.756

7.097

0.5

3.567

3.369

2.091

2.145

2.341

4.575

2.471

2.533

Latin America and the Caribbean

Gross domestic product, constant prices

Percent change

Units

1.134

0.16

-6.877

7.429

4.208

2.399

2.371

2.014

2.387

2.708

2.712

2.706

2.551

Middle East and Central Asia

Gross domestic product, constant prices

Percent change

Units

2.670

3.141

-2.199

4.356

5.452

2.245

2.419

2.956

3.539

3.975

3.695

3.668

3.738

Sub-Saharan Africa

Gross domestic product, constant prices

Percent change

Units

3.302

3.203

-1.544

4.685

4.125

3.589

3.986

3.818

4.187

4.317

1.580

4.568

4.534

 

* Source: International Monetary Fund, World Economic Outlook Database, April 2025

Emerging Europe
boasts lowest taxes & labor costs

Corporate tax rates

Labor cost per hour ( E ), 2017

Taxes much lower in CEE vs. developed world

States provide tax incentives & additional stimulus to attract foreign investors

While convergence has been driving income growth, wages are still far below European averages

Min wages range b/n €551 and €707 eur in Bulgaria and Hungary vs €2 161 and €2 193 eur for Germany and The Netherlands.

Emerging Europe
stock markets lagging behind

 
 MSCI EFM
Europe+CIS
ex RU, €
30.06.2024
1Y8.42%
3Y,
annualized
21.02%
5Y,
annualized
10.95%
10Y,
annualized
0.54%

Emerging Europe
compelling valuations

FORWARD P/E

P/B, MRQ

DIV YLD

P/E PER COUNTRY, TTM