The Evli Emerging Frontier fund was launched on October 8, 2013. The fund’s target is to find great companies at a good value, and we have added 17 names to the portfolio so far.
Talking about a seven-week track record can be about as informative as reading with your eyes closed, but we hope this first monthly glimpse provides a feel about the portfolio structure. While the strategy does not have an official benchmark index, the fund has been at par with the MSCI Frontier Emerging Index, the closest (imperfect) match. The portfolio was affected by volatility in some shares in the first few weeks of the fund’s life. Typhoon Haiyan passed right over one of the power plants of our holding in the Philippines. In Thailand, on the other hand, mass protests shook the market, and with it the high-beta IT company that we invested in; we partially chose it for the ongoing expansion into Myanmar. We believe the fundamentals of these companies are still in place, and we expect a gradual recovery. In contrast, our Malaysian consumer plays performed nicely over the period, and we project our Kenyan supermarket chain to grow well alongside its market.
The team is currently looking at companies in the Middle East and will also be munching on malaria pills and racking up some frequent flyer miles in Africa. We will be visiting telecoms, fertilizer companies, schools, and food producers in several countries. Hidden gems tend to be located under seemingly insignificant rocks, and we will be looking underneath several in the coming weeks and months.
November’s unrelenting market volatility continued through December. Of the 22 markets that the fund actively follows, 14 dipped in euro terms – same as the month before. Turkey’s corruption scandal shook the market downward, while Thailand and Philippines continued to struggle with riots and typhoon aftershock, respectively. Even Argentina gave back much of its phenomenal November gains.
The team continued to look for value and made a few additional investments, including a real estate developer in Malaysia and a budget airline operating in southern Africa. A visit to Africa also yielded a close brush with a militant conflict and several power outages. The list of companies on the follow-closely list also grew with a few names and we expect to make some new investments after additional due diligence.