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East Capital New Europe

East Capital New Europe

NAV

22.71 EUR

1 day

+0.62%

YTD

+24.02%

Date

2025-07-18

Sustainability

Article 8

NAV

120.22 USD

1 day

+1.34%

YTD

Date

2025-07-18

Sustainability

Article 8

NAV

143.34 SEK

1 day

-0.02%

YTD

+21.39%

Date

2025-07-18

Sustainability

Article 8

NAV

23.57 EUR

1 day

+0.62%

YTD

+24.36%

Date

2025-07-18

Sustainability

Article 8

East Capital New Europe invests in companies across the emerging markets in Central and Eastern Europe (excluding Russia), leveraging the region's strong growth potential and attractive valuations.

The fund will mainly focus on investing in shares of companies located in countries that have joined the European Union since 2004 and that may join in the future.

To capture growth potential, at attractive valuations, the fund takes a broad investment approach across multiple countries, sectors, and companies. With an all-cap mandate, the fund has the flexibility to invest in both large, mid and small-cap companies.

The fund is not constrained by a benchmark and the experienced investment team—drawing on local expertise and deep market insights—identifies the most compelling opportunities to build a diversified, low turnover portfolio focused on long-term value creation.

Our investment strategy is based on fundamental analysis, long-term perspective, and stock-picking expertise, ensuring a balanced approach that captures both growth and value opportunities in the region.

All East Capital Group strategies follow a structured ESG framework, seamlessly integrated into the investment process to promote responsible investing.

East Capital New Europe Fund delivered a return of 16.1% during the quarter, underperforming the benchmark by 0.2%. Strong market contributors included Greece (+29.6%), Hungary (+20.9%), and Romania (+19.6%). Poland also delivered solid gains (+15.8%), despite presidential election turbulence, while Turkey posted a more modest 2.8% increase but remained our top alpha contributor due to a cautious underweight position.

Greece was the best-performing market, up 30%, with our holdings performing 31%, driven by investor confidence ahead of the country’s expected upgrade to developed market status, signalling improved economic fundamentals. Fiscal discipline, ongoing reforms, and steady EU fund inflows also supported growth, boosting bank valuations and market sentiment. Banks were by far the strongest performers, up 30-48% during the quarter. Alpha Bank was the best performer, up 48%, due to its lower valuation and increased cooperation and a potential bid from Unicredit. Alpha Bank is one of our larger holdings in the fund, and added 16 basis points of alpha. Another strong performer was our largest Greek holding, Optima Bank, up 46% during the quarter and adding 88 basis points to alpha. We met all our Greek banks during the quarter on our travels to Greece, and Optima remains our favourite, with one of the highest ROE rates among banks in Europe (24%) and a loan book set to grow by 32% in 2025-26. Furthermore, its EPS is growing by 15%-12%, the fastest in our markets, while the stock trades at 8.3x 2026e P/E. Theon International also performed strongly, up 41% in Q2, on the back of increasing sentiment towards the defence sector and the company’s ability to rapidly expand its backlog and grow sales at 30%+ in 2025, and potentially even in 2026.

Another strong performance came from Moldova, with Purcari Wineries delivering a strong 44% gain this quarter, contributing 75 basis points of alpha to the fund. A long-term holding in our portfolio, Purcari has received an attractive bid due to its leading position as Romania’s number 1 premium wine brand - with a 12% market share - and the largest exporter of Moldovan wine. The company’s vast portfolio spans 1,450 hectares of premium vineyards across Moldova, Romania, and Bulgaria, with the capacity to produce over 35 million bottles annually. A strategic bid from a Polish FMCG group came at a 49% premium, valuing the stock at 12x earnings – up from a low 8.6x P/E – highlighting the underlying value of profitable, well-positioned companies in the region and crystallising their value for long-term investors like us.

The Polish market gained an impressive 16%, supported by solid GDP growth estimated at 3.5-4%, soon comparable to China’s pace, and high double-digit corporate earnings growth that significantly outperformed the broader European market. While the presidential election saw the pro-EU candidate lose, the political impact remains limited, with the PiS government maintaining the status quo and avoiding early elections. EU funds are set to continue to flow smoothly until 2027, providing a vital anchor for economic expansion, supported by an expected loose fiscal stance and increased social spending. Attractive valuations at around 10x P/E, offering a significant discount on both Europe and emerging markets, have drawn investor interest. Still, short-term volatility in Poland led to banks’ performance weakening somewhat by the end of the quarter, as risks of a bank tax resurfaced. Despite this, our top pick in Polish banking, Bank Pekao, outperformed, gaining 22%, and added 35 basis points of alpha, partially because we trimmed bank exposure at the top of the market just before the election, anticipating some unfavourable results. On the negative side, market volatility punished several of our stocks in Poland. Anticipating fiscal spending and higher social benefits, we have been increasing our exposure to the consumer sector: grocery retailer Dino, clothing and footwear brands LPP and CCC, and e-commerce platform Allegro. However, some of these stocks were still punished due to unfavourable May-June weather in the region, and as a space added 113bps of negative alpha. We believe, though, that the cheap valuation of 6-6.5x EV/EBITDA, strong ca. 20% growth, and potential fiscal stimulus in terms of tax reductions, which could significantly increase average wages by 20% or more, signal a much stronger second half of 2025 for consumer stocks, where we now hold almost a 4% overweight. We also lost significant alpha on large Polish underweights like PKN Orlen, PGE, and CD Projekt, totalling 120 basis points; these saw some speculative surges, but we do not believe in their near-term fundamentals and hence remain underweight.

The Turkish market underperformed in Q2 2025, posting just a 3% gain, while our holdings rose by 12.1%, adding 178 basis points of alpha. Part of our portfolio’s strong performance includes short-term Turkish bonds, some maturing in August 2025, offering yields of 45-49% TRY. One of our top holdings in Turkey, IT company Logo, was up 24%, adding 14 basis points to alpha as the company continues to grow, with sales up by 11% in real terms, and trading at 6.7x EV/EBITDA. We lost 24bps of alpha in Enka Construction after a strong year-to-date performance, as the stock slowed amid a lower probability of and sentiment towards peace in Ukraine being achieved soon. However, we believe in the company’s strong construction pipeline, both in Turkey and abroad, even without Ukrainian projects, with a 32% year-on-year growth in its construction order backlog. We added somewhat to our UW position of Turkish equities in Q2 2025, anticipating a sustained disinflationary trajectory and credible monetary policy following the political turbulence in March and the central bank’s implicit rate hikes to support the currency and reserves. The central bank may warm up to rate cuts in July, which would support Turkish banks and corporates currently struggling in a very high-rate environment.

We remain optimistic and continue to seek the best selection of high-quality stocks demonstrating growth and strong balance sheets. East Capital New Europe Fund trades at an undemanding 8.9x P/E, with 14% year-on-year earnings growth, and offers a 4% dividend yield for 2025. We believe Eastern European markets offer a compelling fundamental story at very attractive valuations—20-30% cheaper than both continental Europe and emerging markets, benefitting from the momentum of capital inflows to Europe and emerging markets. The region combines higher growth, significantly lower valuations, and lower trade war and political risks. Moreover, the geopolitical risk premium related to the nearby Ukraine conflict is expected to decline over time, potentially unlocking new opportunities in Ukrainian reconstruction.

 

 

Performance in USD net of fees.

This publication is not directed at you if we are prohibited by any law in any jurisdiction from making this information available to you and is not intended for any use that would be contrary to local laws or regulations. Every effort has been made to ensure the accuracy of the information, but it may be based on unaudited or unverified figures or sources. The information should not be used as the sole basis for an investment. Please read the Prospectus and the KID, which are available on the fund page.

East Capital New Europe receives merged assets from East Capital Eastern Europe

The merger is designed to enhance efficiencies, optimise costs, and create better investment opportunities. 

While the fund’s investment strategy remains unchanged, the integration of assets will align with the current holdings of East Capital New Europe, ensuring continuity for investors.

The merger will become effective on 31 March 2025.

For more details, please refer to the "Notice to Shareholders" available under the Documents section.

Geographical Split

Sector Allocation

Largest Holdings

Fund facts

Fund

East Capital New Europe A EUR

ISIN

LU0332315042

Launch date

2014-04-10

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

2

Yearly fee

2.21%

Management fee

1.75%

Benchmark

MSCI EFM EUROPE + CIS (E+C) ex RU (Total Net Return)

Fund

East Capital New Europe A USD

ISIN

LU2903459100

Launch date

2025-03-31

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

n/a

Yearly fee

2.22%

Management fee

1.10%

Benchmark

MSCI EFM EUROPE + CIS (E+C) ex RU (Total Net Return)

Fund

East Capital New Europe A1 SEK

ISIN

LU2437452928

Launch date

2022-03-31

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

3

Yearly fee

2.22%

Management fee

1.75%

Benchmark

MSCI EFM EUROPE + CIS (E+C) ex RU (Total Net Return)

Fund

East Capital New Europe R EUR

ISIN

LU0972918618

Launch date

2013-09-30

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

3

Yearly fee

1.72%

Management fee

1.25%

Benchmark

MSCI EFM EUROPE + CIS (E+C) ex RU (Total Net Return)

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More information

Reporting of the fund's historical returns does not consider inflation.

Past performance of the A SEK share class prior to 1 October 2013 relates to the Swedish registered East Capital Baltic Fund, which from 1 October 2013 is a feeder fund to the A SEK share class. 

Past performance of East Capital New Europe prior to 9 January 2019 relates to East Capital Baltics, which from 9 January 2019 was reorganised with a new objective and investment policy.

Past performance of the A1 SEK share class prior to 01.04.2022 relates to the A SEK share class of the Sub-fund whose performance prior to 01.10.2013 relates to the former Swedish registered East Capital New Europe which from 01.10.2013 was a feeder fund to the A SEK share class of the Sub-fund until 31.03.2022.

OMX Baltic Benchmark until 08.01.2019. MSCI EFM CEEC ex Russia from 09.01.2019. MSCI EFM Europe + CIS ex Russia from 01.01.2023.

2022-04-01

The merger of the Funds East Capital Balkan, East Capital New Europe, East Capital Russia and East Capital Eastern Europe with East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe (respectively) has been carried out in accordance with the submitted merger plan, which was approved by Finansinspektionen (the Swedish Financial Supervisory Authority) on 15 February 2022.

East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe thus ended on 1 April 2022.

Following the merger, former shareholders in East Capital Balkan, East Capital New Europe, East Capital Russia and East Capital Eastern Europe now own shares in East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe.

More information about the merger, such as the auditor's opinion on the exchange relationship, can be obtained from the management company East Capital Asset Management S.A. upon request.

Investing through a financial intermediary may impact the investor’s rights to compensation in the event that compensation is paid due to errors or non-compliance.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by East Capital. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.mscibarra.com)