We believe Emerging Europe offers excellent investment opportunities as the regional economies are set to grow faster that the Eurozone and given local stock exchanges' early stage of development. The positive market outlook combined with diminishing risk levels are starting to attract international investors to the region.
Our in-depth local knowledge and on-the-ground presence give us an edge in analyzing the economies and markets of Emerging Europe. All investment products are managed by seasoned investment specialists with solid capital markets expertise and a passion for Emerging Europe. Thanks to our location and excellent analytical capabilities we can access information quickly and easily as we regularly visit companies and events. Karoll Capital’s PMs are dedicated to constructing investment portfolios positioned to outperform regional benchmarks and peers.
At Karoll Capital we believe in taking a long-term view when making investment decisions. We expect Emerging Europe to continue to outperform the Eurozone in the long run due to the convergence processes related to income levels, household living standards, interest rates, etc. This conviction is reflected in our asset allocation and stock selection process, where the horizon of portfolio investment decisions is usually beyond 3 years. Likewise, our clients are aware of investments’ volatile nature, so normally have a long-term investment perspective.
Each of our investment products is managed by a separate Portfolio Manager. In making asset allocation decisions, the PM is supported by an eight-member Investment Committee. The team debates and decides on the asset classes comprising the portfolio, as well as the geographic and sector splits. The stock selection is performed by the fund’s PM with the help of a seasoned analyst team. Unlike most assets managers investing in the region, we have the freedom to deviate from local indices based on our views. This gives us flexibility in our investment choice, regularly leading to outperformance of benchmarks and peers. Ongoing risk management is essential to ensure excessive risk is avoided - our strategies’ volatility measures are consistently lower than those of benchmarks. Conducting monthly attribution analysis helps us determine to what degree performance is affected by country/sector/stock selection and quantify true alpha.
We apply five layers of stock selection filters; 1.) market cap & liquidity; 2.) corp governance, transparency, ESG; 3.) sector outlook & company competitiveness; 4.) financial strength; 5.) in-house valuation.
Because of market inefficiencies we believe Emerging Europe is abundant with mispriced assets. Our analysts possess native understanding of the region’s economies, companies, and market dynamics and use this in screening the broad investment universe to identify “hidden gems” through proprietary research. On-site company visits are a key part of research as well. In addition to employing valuation methods, we always consider investor psychology, liquidity and order flows. We focus on responsible investment and became the first local signatory of UN’s PRI.
Our Investment universe
3,000+ listed companies in CEE
Mkt cap & Liquidity
Investment Universe - 1,500
Corp Governance, Transparency, ESG
Sector Outlook & Company Competitiveness
|Emerging market and developing economies||4.3%||4.4%||4.7%||4.7%||4.7%||4.9%|
|Commonwealth of Independent States||-2.0%||0.4%||2.1%||2.4%||2.4%||2.4%|
|Emerging and developing Asia||6.8%||6.5%||6.5%||6.5%||6.3%||6.4%|
|Emerging and developing Europe||4.7%||3.3%||6.0%||3.8%||2.0%||2.8%|
|Latin America and the Carribean||0.3%||-0.6%||1.3%||1.2%||2.2%||2.7%|
|Middle East and North Africa||2.4%||5.2%||1.8%||2.0%||2.5%||2.9%|
* Source: IMF WEO October 2018
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 €194 in Bulgaria and € 425 in Turkey, vs. €1,473 in Germany and €1,500 in UK
ex RU, €
P/E per country, ttm