East Capital Balkans

The East Capital Balkans Fund saw a return of 5.6% during the quarter. Greece was the main driver, contributing 6.6 percentage points to the fund's return, with Greek holdings rising by 22.2%. Poland (+12.8%), Austria (+10.0%), Croatia (+4.3%) and Slovenia (+2.9%) also contributed positively, while Turkey (-4.7%), Hungary (-5.1%) and Romania (-2.8%) declined. The key portfolio change was a rotation into regional refiners. Tüpraş, Motor Oil Hellas and MOL were added during the quarter and now account for 16.1% of the fund. These companies contributed 2.3 percentage points to returns over a short period.

Greece is now our largest country exposure, at 39.3%, up from 28.3%. The macroeconomic backdrop remains supportive, with GDP growth expected to reach 1.9% in 2026. The planned MSCI developed market upgrade in May 2027 remains an important catalyst. Greek banks were once again the standout performers, supported by ECB rate hikes and sustained momentum in loan growth. Piraeus was the fund's largest contributor, returning 25.1% and adding 2.1 percentage points. It currently trades at 1.2x P/B and 8.7x P/E for 2027. Optima also performed strongly, contributing 2.0 percentage points, and we increased our position during the quarter. The bank has an estimated RoTE of 27%. We also added to our positions in Alpha Bank and Eurobank. Greek banks are set to deliver their strongest quarter of the year in Q3, with double-digit EPS growth expected in 2026. Motor Oil Hellas, a new addition to the portfolio, contributed 1.3 percentage points, supported by strong crack margins. Depending on the product, light and middle distillate cracks remained 3-4 times higher year on year in August and increased month on month. Motor Oil Hellas is expected to deliver 78% growth in both EBITDA and earnings.

Turkey’s share of the fund declined from 30.9% to 23.8%, with the country’s equities falling 4.7% amid ongoing disinflation and tight policy measures. Turkish equities came under additional pressure in September following a crisis in the domestic investment fund sector. After several asset managers were unable to honour redemptions, the Capital Markets Board placed some funds into liquidation. The resulting forced selling pushed the BIST 100 into bear-market territory. The August CPI was 31.5% year on year, down from 31.8% in July, while the monthly inflation rate was 1.84%, compared to the market consensus of 1.95%. Annual inflation therefore maintained its downward trend.

Tüpraş, a new position, was the largest contributor in Turkey, adding 0.7 percentage points on strong crack margins. Food retail also performed well, with gains in Şok and BIM. However, these were offset by weakness in Turkish Airlines, DO & CO, Enka and banks including Akbank and Yapı Kredi. We reduced our exposure to Turkish Airlines, DO & CO, Enka and Coca-Cola İçecek. We exited Ronesans REIT after realising gains from our May ABB participation. We also sold Mavi, Ebebek and Hepsiburada due to continued weakness among Turkish consumers and evidence of trading-down behaviour. In contrast, we initiated a position in TAB Gıda, which we consider a genuine growth company operating in a difficult environment. We expect 10% real EBITDA growth and the company remains on track to achieve this.

In Hungary (14.4%), following their strong second-quarter rally after the Tisza Party´s election victory, OTP Bank and Magyar Telekom consolidated. We view these movements as profit-taking and remain optimistic about the Hungarian macroeconomic outlook. We added MOL during the quarter, which contributed 0.3 percentage points.

Elsewhere, Raiffeisen rose 10.0%, while Polish retailer LPP returned 33.5%. Končar also advanced, building on its strong performance in the first half of the year. In Romania, we reduced our weighting from 4.9% to 1.9%, exiting MedLife and halving our position in Banca Transilvania, following the competition authority’s imposition of a record fine on Romanian banks for alleged collusion in setting interbank rates.

Our outlook for the region remains positive, and we continue to focus on high-quality companies with resilient balance sheets and sustainable earnings growth. The East Capital Balkans Fund trades at 11.4x P/E for 2027, with an expected earnings growth rate of 7% and a dividend yield of 5%.

Performance in USD net of fees.

The information in this document should not be considered investment advice and should not be used as the sole basis for an investment decision. Please read the Prospectus and the KID, which are available on the fund page. 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.