This fund will be run as a concentrated best ideas portfolio containing 30-40 stocks. It will invest for growth in Central and Eastern Europe, Russia, Turkey and non-European former member states of the USSR. It can also invest up to a third of its assets in Western European companies that benefit from exposure to emerging European markets.
Elena Shaftan and the emerging European equities team will manage the fund. Shaftan joined Jupiter in 2000 from AIB Govett Asset Management, where she specialised in Eastern European equities for five years. She has managed the Jupiter Emerging European opportunities fund since 2002, the Cominvest European emerging market equity fund since 2000 and Jupiter Emerging Europe select fund since 2006.
Shaftan will look for companies that she thinks can achieve above average growth throughout the economic cycle. There will be a focus on market leaders and niche players with the ability to defend margins and market share from competitors. The interests of the management behind these companies will be aligned with shareholders and the companies will have string free cashflow, low levels of gearing and attractive valuations.
On a positive note, returns from emerging Europe are coming from economic and structural developments, with export revenue from natural resources driving consumer and infrastructure spending. This is showing no signs of slowing down, while stock valuations remain attractive relative to global emerging markets.
Some Western European companies have Eastern European operations that are contributing to revenue growth and lower costs. This fund’s flexibility to invest up to a third in such companies will allow investors to tap into a broader range of opportunities.
However, investing mainly in emerging Europe carries higher risks than developed markets. Stocks may be smaller, less liquid and more volatile, while markets are characterised by less regulation and a limited amount of reliable information for investors. This fund could also face competition from JPM New Europe, which has the benefit of a 10-year track record.